As advisors, we have the responsibility to operate in our clients’ best interests, whether we’re researching financial products, building a plan for their future retirement or helping them manage their savings during retirement years. But in addition to this, we also have a duty to protect them in the event that they fall victim to exploitation, abuse or any one of the many financial scams prevalent today. This article will cover what advisors need to know about the current state legislation governing senior investor issues, advisors’ responsibilities of reporting and what advisors can do to help a senior client they suspect has fallen victim.
Ohio Adult Protective Services ORC 5101.63
Earlier this year, a provision within the Ohio Adult Protective Services statute (Ohio Revised Code 5101.63) was amended to have implications for every financial advisor in the state of Ohio, especially those with senior clients. The current code now classifies any “dealer, investment adviser, sales person, or investment advisor representative licensed under Chapter 1707 of the Revised Code” (in addition to “investment advisers and financial planners” per a 2018 amendment) as mandatory reporters of known or suspected elder abuse.
Having a duty to report abuse means that financial advisors are required to immediately report to the Ohio County Department of Jobs and Family Services- Adult Protective Services when they have reasonable cause to believe than an adult is currently experiencing or is in a condition which is the result of abuse, neglect or exploitation. This applies to abuse and exploitation not just of a financial origin. Physical and mental abuse and exploitation are also required to be reported.
While certain professionals are deemed “mandatory” reporters, it’s also important to note that anyone can make a report to Adult Protective Services under this law, such as a non-licensed employee of a financial firm (pending firm policy considerations).
Who is covered by this law?
ORC 5101.63 covers any adult aged 60 or older within the state of Ohio. The individual must possess a handicap as a result of the infirmities of aging or a physical or mental impairment that prevents that person from providing for their own care or protection. The individual must also reside in an independent living arrangement.
In order to be covered under ORC 5101.63, all three of these conditions must be met.
Immunity for mandatory reporters, penalties for failure to report
According to the law, any mandatory reporters who make a report, testify or act responsibly in the discharge of their official duties under this law are immune from civil and/ or criminal liability unless it can be proven the person acted in bad faith or with malicious purpose. Employers cannot take any detrimental action or retaliate against employees for reporting abuse and/or exploitation.
On the other side, those classified as mandatory reporters who fail to report abuse are considered guilty of a fourth-degree misdemeanor. Penalties may include any sanction or a combination of sanctions provided for misdemeanors under Ohio’s Criminal Code, including a jail term of not more than 30 days or fines of not more that $250. In addition, failure to report could result in a breach of fiduciary duties, a violation of firm policy and impacts on the individual’s professional license and reputation within the community.
Further actions advisors can take to protect their clients
Beyond reporting abuse after the fact, there are additional actions that advisors can take to limit the impact that exploitation has upon their clients’ financial situation.
Effective September 2021, ORC 1707.49 allows advisors with a reasonable cause to believe that a client who is an eligible adult (aged 60+, or otherwise vulnerable) may be subject to financial exploitation to place a hold on “any transaction impacted by the past, current, or attempted financial exploitation for a period of time not to exceed fifteen business days.” The law also allows for a possible extension of the transaction hold for an additional 15 days under certain circumstances. Licensees placing such holds must follow all internal policies and procedures, and report the hold to the county Department of Jobs and Family Services. Transaction holds must also be reported in writing immediately to the Ohio Division of Securities for further investigation.
Under ORC 1707.49, those who take action receive civil and administrative immunity for good faith reporting and transaction holds. Reports on the holds placed that are made to a state agency are considered a confidential investigative record of the Division, and must be retained by the reporting firm for 5 years.
The importance of protecting clients’ financial wellbeing against abuse and exploitation cannot be overstated. Today’s advisors must maintain a watchful eye over their clients’ accounts, especially those of elderly and infirm individuals, and immediately file a report if they have reasonable cause to suspect abuse. But beyond merely reporting when potential abuse and exploitation has or is occurring, current legislation allows advisors to take an extra step in intervening to stop exploitation from happening.
To learn more about senior investor issues and resources, contact us.