Brokers will soon have a couple new weapons to battle financial fraud targeting older Americans.
First, a rule from securities regulators goes into effect on Feb. 5 that allows brokers to put a temporary hold on a requested account withdrawal if financial exploitation is suspected.
"A lot of times advisors haven't had the ability to stop a suspicious transaction," said Marve Ann Alaimo, a partner with law firm Porter Wright Morris & Arthur in Naples, Florida.
"This, at least, lets them protect their clients and put it on hold until they can verify if it's a valid transaction," Alaimo said.
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Separately, an amendment to an existing securities rule will now require brokers to ask customers for a trusted person the advisor can reach out to if fraud or mental decline is suspected. The request for a trusted contact will be made either when accounts are opened or when brokers are updating information for existing clients.
Both changes, which were approved a year ago and are governed by the Financial Industry Regulatory Authority, aim to tackle the growing issue of elder fraud. A year-over-year increase in the number of cases and complaints involving senior financial fraud and exploitation was reported last year by 29 percent of state securities regulators, according to the North American Securities Administrators Association.
Additionally, older Americans lose roughly $36.5 billion to fraud each year, according to 2015 estimates from retirement-planning site True Link.