A number of states are taking action to protect elderly investors who have Alzheimer's disease or other forms of dementia from being conned out of their wealth, Reuters reports.
Washington, Delaware, and Missouri have all enacted laws enabling retail brokers to take action when they suspect a scam is being perpetrated against a client with dementia. The measures, which are being considered in other states as well, give brokerages temporary authority to prevent older clients from transferring funds in their accounts to other parties if a wealth manager or financial advisor believes his or her client has dementia and is being scammed by a con artist or unscrupulous family member. While roughly half of the fifty states have laws on the books requiring employees of financial institutions to alert state agencies when they suspect elder financial abuse, not all of them extend to retail brokerage employees or allow the institution to delay suspect withdrawals.
According to the Alzheimer's Association, more than five million Americans over the age of 65, or about 1.5 percent of the U.S. population, have Alzheimer's disease, and that number could balloon to 7.1 million by 2025. According to the Securities Industry and Financial Markets Association, U.S. seniors lose as much as $2.6 billion a year to financial exploitation, and more than half of such cases are perpetrated by friends, family members, or caregivers. Given the unpredictable progression of dementia — with long periods of lucidity followed by bouts of forgetfulness and confusion — it is often difficult for wealth managers to identify financial abuse and protect seniors. What's more, calling concerned family members to question a client's instructions may violate privacy laws or rules that require transactions to be processed quickly, industry compliance professionals told the Times, while following a client's instructions could result in the client falling prey to a scam. Indeed, without new laws, brokers could face lawsuits for either taking action or for honoring the suspect transaction.
"Always, the best solution is going to be stiff penalties and jail time for people who perpetuate fraud and to try not to do anything that is going to burden the legitimate playing field with government red tape," said Gerry Scimeca, a spokesperson for the 60 Plus Association, an elderly rights group that promotes less government involvement in senior issues.