The House of Representatives passed the Financial Exploitation Prevention Act on Monday by the suspense-free margin of 419-0. If enacted, the bill would permit open-ended investment companies and transfer agents, which keep records of stocks and bonds, to postpone payment on a redeemed security if they suspect the security is being redeemed to exploit the security holder.
Congresswoman Ann Wagner, R-Missouri, who proposed the bill, said in a statement that 20% of seniors are financially exploited every year, which adds up to an estimated $2.9 billion annually.
The bill would permit a delay on redemption for 15 days if the open-ended investment company or transfer agent suspects exploitation. They may continue the delay for an additional 10 days if, after an internal review, their initial suspicion has not been resolved. State government agencies and courts of “competent jurisdiction” would have the authority to extend the delay past this 25-day window, although the bill does not lay out a specific process by which investment companies or transfer agents would elevate the issue.
The bill would apply to account holders aged 65 or older or any adult who, as a result of a disability, “is unable to protect the individual’s own interests,” regardless of age.
Within two days of an initial delay, the company or agent must inform the account holder in writing, which can include electronic communication, of the delay. The amount to be redeemed must be held in a demand-deposit account in the meantime.
Open-ended companies and agents must also have procedures to identify and report financial exploitation; methods of releasing and holding the assets in question; and must designate specific employees with the authority to delay payment. They also must retain records which document the postponement and its basis; the names of employees with the authority to postpone payment; the notification provided the account holder; and results of internal reviews.
The bill also requires the Securities and Exchange Commission to provide a report with legislative and regulatory recommendations to reduce financial exploitation, in consultation with other agencies.
The Insured Retirement Institute expressed support for the bill in an emailed statement. The policy is also listed in its Retirement Security Blueprint.
“The prevention of financial exploitation and the protection of older and vulnerable Americans is a top legislative and regulatory objective for IRI,” said Wayne Chopus, IRI president and CEO. “Our members are on the front lines of this issue, working with clients across America every day. As a result, they are often the first to notice that a client may be the victim of a financial crime.”
John Jennings, the assistant director of governmental affairs at IRI, notes that the bill would only allow the delay of a transaction for a set period of time. This is important, because there will surely be false alarms, but those cannot be delayed indefinitely, thereby minimizing the damage done to legitimate redeemers.
Jennings also explains that a previous measure, the Senior Safe Act, passed in 2018 as Section 303 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, gave liability protection to companies when reporting potential fraud. He says new legislation is often required because criminals are constantly adapting to the regulatory and enforcement environment, so legislation needs to stay “one step ahead.”
He adds that the bipartisan and unanimous vote is a “good omen” for this bill’s final passage, and since it passed the House early in the session, there is plenty of time to get it passed in the Senate.
The bill is now in the hands of the Senate Committee on Banking, Housing, and Urban Affairs, as of Tuesday. A spokesperson for the committee did not immediately return a request for comment.
You Might Also Like:
« Adviser Product Partnerships