Elder Financial Exploitation by Guardians

Recently the Government Accountability Office (GAO) published a report about the extent of elder abuse by guardians and measures that exist to protect older adults. This has become an issue of utmost importance as the number of older adults, over the age of 65, are expected to nearly double to 88 million by 2050 (GAO Report 2016). A “guardian” is a legal relationship created by a state court by granting one person the authority and responsibility to make decisions on behalf of an incapacitated individual, like an older adult. The appointed guardian could be a family member, a professional guardian, or a public guardian. According to the GAO report the most common type of elder abuse inflicted by guardians appear to be financial exploitation. This GAO report attempted to identify red flags of abuse, study reported complaint data about guardianship abuse in 6 states- California, Minnesota, Florida, Ohio, Texas and Washington- and evaluate measures that are in place to help protect older adults.
The federal government does not regulate or directly support guardianship but they may provide indirect support through federal agencies, by sharing information and providing funding for state and local courts who oversee the guardianship process. There are limitations on the data available to study cases of elder abuse because states do not have adequate data on number of guardians serving seniors and not all cases of elder abuse are reported.  A close look at reported elder abuse cases since 2010, identified using public-record searches reveal instances of misappropriation of funds, falsified payments, mistreatment of the elderly, diversion of payments, overcharging accounts, excessive spending and inflated personal expenses, and neglect.

FINRA ’s Role in Fighting Elder Financial Exploitation

FINRA, the regulator of securities firms and brokers also has measures in place to counter elder financial exploitation. According to National Adult Protective Services, senior citizens are usually abused by someone who is trusted by them, like their guardians, so advisors should be wary of authorized agents acting on behalf of their client. FINRA’s Board of Governors approved a rulemaking item in 2015 that enables investment firms to put temporary holds on fund disbursement and securities transactions, and notify a designated trusted contact if they have reasonable belief of financial exploitation.  The proposed FINRA rule would permit firms and brokers to place temporary holds on disbursements of funds or securities, from the accounts of investors aged 65 or older, and get safe harbor protection if they choose to act under “a reasonable belief in financial exploitation.”

FINRA’s account information rule requires firms to make reasonable efforts to obtain and maintain information of a trusted contact person when opening a customer’s account. Investment advisors have a duty to look for next of kin when dealing with aging clients, and keep records about estate attorneys and power of attorneys (POA) in case their clients face incapacity. New FINRA rules emphasize the “reasonable efforts” that all advisors must exercise to obtain such information. Because of the possibility of abuse, it is not enough to have an appointed guardian but advisors should monitor accounts more closely once a trusted agent has exercised a POA. FINRA also established a toll-free senior hotline in April 2015.

Other Agencies and their Role

In 2013, the federal agency HHS began developing the National Adult Maltreatment Reporting System (NAMRS), a national reporting system on the exploitation and abuse of older adults with disabilities, to help identify elder abuse cases in the hands of guardians. According to the GAO report, the pilot phase of this study is now complete and the agency hopes to roll it out in 2017. This in turn could potentially help compile more information on elder abuse and intensify the focus on screening, education, monitoring of guardians and enforcement of law concerning guardians. HHS has also launched several grants, between 2016 and 2018, to develop materials, benchmarks and best practices to address, educate and overcome the issue of elder abuse.

In addition to federal agencies, states and courts that shoulder primary responsibility over the guardianship process play a pivotal role in protecting older adults. The National Association for Court Management, published an adult guardianship guide on the guardianship program that had detailed suggestions for effectively establishing guardianship, monitoring guardians and training stakeholders in this process. Guardianship laws vary from state to state. Uniform Law Commission, which is responsible for drafting legislation for state statutory laws have promoted uniform procedures in appointing guardians and due process protection in guardianship proceedings and conflicts.

One broad suggestion for protecting older adults is screening and ensuring that the older adult really needs a guardian. By appointing a guardian, the elderly person loses a lot of his/her rights and decision making power, from the ability to sign contracts, buy/sell real estate, making healthcare decisions, therefore, the court must determine and encourage the least-restrictive option while granting guardianship. Of course, screening recommendations also include criminal history and credit checks and periodic re-examination of the need for guardianship. Other measures involve educating guardians so that they understand their role and responsibilities. Not all bad decisions are made intentionally, some of them are due to lack of information. There are court rules in place requiring professional guardians to complete training programs developed by a Certified Professional Guardian Board and video/web-based training modules to prepare family guardians for their role. Other proposed measures include in-person visits to check on the well-being of elderly people under guardianship and examination of guardian’s expenditure.


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