Exploitation of Vulnerable Adults (NASAA Model Act, 2016)
The NASAA Model Act to Protect Vulnerable Adults from Financial Exploitation is one of the most detail-heavy and heavily tested topics in this unit. Pay close attention to which actions are mandatory versus permissive, and to the specific timelines.
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: Wrongful or unauthorized taking, withholding, appropriation, or use of an eligible adult's money, assets, or property; OR any act or omission using deception, intimidation, or undue influence to obtain control over or convert such assets
- 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 (Section 3)
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 (Section 4)
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 (Section 5)
A qualified individual may (permissive, not mandatory) 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 (Section 6)
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 (Section 7)
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:
- Provides written notification of the delay and reason to all parties authorized to transact on the account within 2 business days (unless a party is suspected of the exploitation)
- Notifies the Agencies (APS and Administrator) within 2 business days
- Continues the internal review and reports results to the Agencies within 7 business days
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
- Either agency may terminate the delay before the maximum period
- A court may extend the delay further or order other protective relief
Immunity for Delaying Disbursements (Section 8)
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 (Section 9)
Broker-dealers and investment advisers must provide access to or copies of relevant records when requested by:
- Adult Protective Services
- Law enforcement
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.