Quick Answer
The NASAA Model Act to Protect Vulnerable Adults from Financial Exploitation requires qualified individuals to report suspected exploitation of an eligible adult to Adult Protective Services and the Administrator. Firms may also delay a suspicious disbursement or notify a designated third party, and good-faith compliance with each provision carries immunity from liability.
Pay close attention to which actions are mandatory versus permissive, and to the specific timelines: this is one of the most detail-heavy and heavily tested topics in the unit.
Key Definitions
- Eligible adult: (a) A person age 65 or older, OR (b) a person subject to the state's adult protective services statute
- Financial exploitation: (a) Wrongful or unauthorized taking, withholding, appropriation, or use of an eligible adult's money, assets, or property; OR (b) any act or omission, including through use of a power of attorney, guardianship, or conservatorship of the eligible adult, to obtain control through deception, intimidation, or undue influence, or to convert such assets, in order to deprive the eligible adult of the ownership, use, benefit, or possession of that money, assets, or property
- Qualified individual: Any agent, investment adviser representative, or person who serves in a supervisory, compliance, or legal capacity for a broker-dealer or investment adviser
Mandatory Reporting to Government
If a qualified individual reasonably believes that financial exploitation of an eligible adult may have occurred, may have been attempted, or is being attempted, the qualified individual shall promptly notify:
- Adult Protective Services (APS), AND
- The state securities commissioner (Administrator)
Key points:
- This is a mandatory obligation; "shall" means must report
- Both agencies must be notified (not one or the other)
- The standard is "reasonably believes," not certainty
Exam Tip: Gotchas
- "Reasonable belief" is the trigger. The qualified individual does not need proof; a reasonable suspicion of financial exploitation of an eligible adult triggers the mandatory reporting obligation.
Immunity for Government Disclosures
A qualified individual who makes a governmental disclosure in good faith and with reasonable care is immune from:
- Administrative liability
- Civil liability
The qualified individual is also immune from liability for failure to notify the customer of the disclosure.
Third-Party Disclosures
If a qualified individual reasonably believes that financial exploitation of an eligible adult may have occurred, may have been attempted, or is being attempted, the same standard that triggers mandatory government reporting, the qualified individual may (permissive, not mandatory) also notify any third party previously designated by the eligible adult.
Important restrictions:
- The third party must have been designated in advance by the eligible adult (e.g., a trusted contact person named on the account)
- Disclosure to a designated third party is NOT permitted if the third party is suspected of the financial exploitation or other abuse
Immunity for Third-Party Disclosures
A qualified individual who makes a third-party disclosure in good faith and with reasonable care is immune from administrative and civil liability.
Delaying Disbursements
A broker-dealer or investment adviser may delay a disbursement from the account of an eligible adult (or an account on which an eligible adult is a beneficiary) if:
- The firm reasonably believes, after initiating an internal review, that the disbursement may result in financial exploitation, AND
- The firm takes the following steps:
- Immediately, but no later than 2 business days after the requested disbursement, provides written notification of the delay and reason to all parties authorized to transact on the account (unless a party is suspected of the exploitation)
- Immediately, but no later than 2 business days after the requested disbursement, notifies the Agencies (APS and Administrator)
- Continues the internal review and reports results to the Agencies within 7 business days after the requested disbursement
Duration of Delay
| Scenario | Maximum Delay |
|---|---|
| Standard delay | 15 business days from when the delay was first imposed |
| Extended delay (at request of APS or Administrator) | 25 business days from when the delay was first imposed |
| Court order | No fixed limit - the court determines the duration |
- The delay expires sooner if the firm determines the disbursement will NOT result in financial exploitation
- During an agency-requested extension, either agency or a court may terminate the extended delay before the maximum period
- A court may extend the delay further or order other protective relief on the petition of the Administrator, APS, the broker-dealer or investment adviser that initiated the delay, or another interested party
Immunity for Delaying Disbursements
A broker-dealer or investment adviser that delays a disbursement in good faith and with reasonable care is immune from administrative and civil liability.
Records Access
Broker-dealers and investment advisers must provide access to or copies of relevant records to Adult Protective Services and law enforcement, either as part of a referral to those agencies or upon their request as part of an investigation.
Key points:
- Records may include historical records as well as records relating to the most recent transactions
- Records provided to agencies are NOT public records; they are not subject to state public records laws
- This provision does NOT limit the state securities commissioner's existing authority to examine books and records
Summary: Mandatory vs. Permissive Actions
| Action | Mandatory or Permissive | Immunity Provided |
|---|---|---|
| Report to APS and Administrator | Mandatory (shall) | Yes - administrative and civil |
| Disclose to designated third party | Permissive (may) | Yes - administrative and civil |
| Delay disbursement | Permissive (may) | Yes - administrative and civil |
| Provide records to APS/law enforcement | Mandatory (shall) | Records are not public records |
Exam Tip: Gotchas
Reporting to the government is mandatory; delaying a disbursement and disclosing to a third party are permissive. The exam will test whether a qualified individual "must" or "may" take a specific action. Also note: a third party suspected of exploitation must NOT be notified, even if they are a designated contact. And the standard disbursement delay is 15 business days (not calendar days), extendable to 25 business days at the request of APS or the Administrator.
What Should You Check on Exam Day?
- An eligible adult is 65 or older, or covered by the state's adult protective services statute; financial exploitation includes misuse through a power of attorney, guardianship, or conservatorship, not just outright taking.
- Government reporting to APS and the Administrator is mandatory on reasonable belief; delaying a disbursement and notifying a designated third party are both permissive, and both require that same reasonable-belief trigger.
- Disbursement-delay notices to account parties and the Agencies must go out immediately, no later than 2 business days after the requested disbursement; the internal-review report to the Agencies is due within 7 business days.
- The standard delay caps at 15 business days, extendable to 25 at APS or the Administrator's request; either agency or a court can end an extension early, and good-faith, reasonable-care compliance with each provision carries immunity.