New Reporting Requirements for Broker-Dealers and Investment Advisers

EFFECTIVE JULY 1, 2016
Act 2016-141
Protection of Vulnerable Adults from Financial Exploitation Act
Ala. Code § 8-6-170 to 179 (1975)

Summary:
The Protection of Vulnerable Adults from Financial Exploitation act mandates reporting to the Alabama Securities Commission and the Alabama Department of Human Resources by “qualified individuals” (agents, investment adviser representatives, and persons who serve in a supervisory, compliance, legal, or member capacity of a broker-dealer or investment adviser) who reasonably believe that financial exploitation of a vulnerable adult may have occurred, been attempted, or is being attempted. The Act also contains the following key provisions:
  • Qualified Individuals who suspect financial exploitation may delay disbursing funds from a vulnerable adult’s account;
  • Provides immunity from administrative and civil liability for actions taken consistent with the Act;
  • Requires that broker-dealers and investment advisors comply with certain requests for information.
  • Authorizes disclosure to third parties in certain instances where a vulnerable adult has a legal relationship with the third party; and
  • Prohibits disclosure to the third party if the qualified individual suspects the third party of the financial exploitation.

More Information:

Full Text of the Act -

BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:

Section 1. This act shall be known and may be cited as the Protection of Vulnerable Adults from Financial
           Exploitation Act.

Section 2. In this act, unless the context otherwise requires, the following words and terms shall have the following
           meanings:

(1) AGENT. The same meaning as in subdivision of Section 8-6-2 of the Code of Alabama 1975.

(2) BROKER-DEALER. The same meaning as in subdivision (3) of Section 8-6-2 of the Code of Alabama 1975.

(3) COMMISSION. The Alabama Securities Commission.

(4) DEPARTMENT. The Department of Human Resources.

(5) FINANCIAL EXPLOITATION. Any of the following:

a. The wrongful or unauthorized taking, withholding, appropriation, or use of money, assets, or property of a vulnerable
           adult.

b. Any act or omission taken by a person, including through the use of a power of attorney, guardianship, or
           conservatorship of a vulnerable adult, to either of the following:

1. Obtain control through deception, intimidation, or undue influence over the vulnerable adult's money, assets,or
           property to deprive the vulnerable adult of the ownership, use, benefit, or possession of his or her money, assets, or
           property.

2. Convert money, assets, or property of the vulnerable adult to deprive the vulnerable adult of the ownership, use,
           benefit, or possession of his or her money, assets, or property.

(6) INVESTMENT ADVISER. The same meaning as in subdivision (18) of Section 8-6-2 of the Code of Alabama 1975.

(7) INVESTMENT ADVISER REPRESENTATIVE. The same meaning as in subdivision (19) of Section 8-6-2 of the Code of
           Alabama 1975.

(8) QUALIFIED INDIVIDUAL. Any agent, investment adviser representative, or person who serves in a supervisory,
           compliance, legal, or associated member capacity of a broker-dealer or investment adviser.

(9) REASONABLY ASSOCIATED INDIVIDUAL or ASSOCIATED MEMBER. An individual known to the investment adviser
           representative, broker-dealer, or firm who is reasonably associated with the account.

(10) VULNERABLE ADULT. Any of the following:

a. A person 65 years of age or older.

b. A protected person included and defined in Chapter 9, Title 38 of the Code of Alabama 1975.

Section 3. If a qualified individual reasonably believes that financial exploitation of a vulnerable adult may have occurred,
           may have been attempted, or is being attempted, the qualified individual shall promptly notify the department and the
           commission.

Section 4. A qualified individual that in good faith and exercising reasonable care makes a disclosure of information
           pursuant to Section 3 shall be immune from administrative or civil liability that might otherwise arise from such disclosure or for
           any failure to notify.

Section 5. If a qualified individual reasonably believes that financial exploitation of a vulnerable adult may have occurred,
           may have been attempted, or is being attempted, the qualified individual may notify a reasonably associated individual, legal
           guardian, any third party previously designated by the vulnerable adult, conservator, co-trustee, successor trustee, or agent under
           a power of attorney of the vulnerable adult of such belief. Disclosure may not be made to a designated third party that is
           suspected of financial exploitation or other abuse of the vulnerable adult.

Section 6. A qualified individual that, in good faith and exercising reasonable care, complies with Section 5 shall be
           immune from any administrative or civil liability that might otherwise arise from such disclosure.

Section 7. (a) A broker-dealer or investment adviser may delay a disbursement from an account of a vulnerable adult or an
           account on which a vulnerable adult is a beneficiary if:

(1) The broker-dealer, investment adviser, or qualified individual reasonably believes, after initiating an internal review of
           the requested disbursement and the suspected financial exploitation, that the requested disbursement may result in financial
           exploitation of a vulnerable adult; and

(2) The broker-dealer or investment adviser:

a. Immediately, but in no event more than two business days after the requested disbursement, provides written
           notification of the delay and the reason for the delay to all parties authorized to transact business on the account, unless any such
           party is reasonably believed to have engaged in suspected or attempted financial exploitation of the vulnerable adult;

b. Immediately, but in no event more than two business days after the requested disbursement, notifies the department
           and commission; and

c. Continues its internal review of the suspected or attempted financial exploitation of the vulnerable adult, as necessary,
           and reports any additional results of the investigation to the department and commission within seven business days after the
           requested disbursement.

(b) Any delay of a disbursement as authorized by this section expires upon the sooner of:

(1) A determination by the broker-dealer or investment adviser that the disbursement will not result in financial
           exploitation of the vulnerable adult.

(2) Fifteen business days after the date on which the broker-dealer or investment adviser first delayed disbursement of
           the funds, unless either the department or the commission requests that the broker-dealer or investment adviser extend the
           delay, in which case the delay shall expire no more than 25 business days after the date on which the broker-dealer or investment
           adviser first delayed disbursement of the funds unless sooner terminated by either the department or commission or an order of a
           court of competent jurisdiction.

(c) A court of competent jurisdiction may enter an order extending the delay of the disbursement of funds or may order
           other protective relief based on the petition of the commission, department, broker-dealer, or investment adviser that initiated
           the delay under this section, or other interested party.

Section 8. A broker-dealer or investment adviser that, in good faith and exercising reasonable care, complies with Section
           7 shall be immune from any administrative or civil liability that might otherwise arise from such delay in a disbursement in
           accordance with this section.

Section 9. A broker-dealer or investment adviser shall provide access to or copies of records that are relevant to the
           suspected or attempted financial exploitation of a vulnerable adult to agencies charged with administering state adult protective
           services laws and to law enforcement, either as part of a referral to the agency or to law enforcement, or upon request of the
           agency or law enforcement pursuant to an investigation. The records may include historical records as well as records relating to
           the most recent transaction or transactions that may comprise financial exploitation of a vulnerable adult. All records made
           available to agencies under this section are not a public record as defined in any state public records law. Nothing in this section
           shall limit or otherwise impede the authority of the commission to access or examine the books and records of broker-dealers and
           investment advisers as otherwise provided by law.

Section 10. The securities commission, from time to time, may make, amend, and rescind such rules pursuant to the
           Alabama Administrative Procedure Act and prescribe such forms as are necessary and desirable to carry out the provisions of this
           act. No rules or forms may be made or prescribed unless the commission finds that the action is necessary or appropriate in the
           public interest or for the protection of vulnerable adults and those protected under the act and consistent with the purposes
           fairly intended by the policy and provisions of this act. In prescribing rules and forms, the commission may cooperate with the
           securities administrators and adult protective services agencies of the other states and the United States Securities and Exchange
           Commission and FINRA with a view to effectuating the policy of this act to achieve general uniformity in the application of the act
           wherever practicable.

Section 11. This act shall become effective on the first day of the third month following its passage and approval by the
           Governor, or its otherwise becoming law.



*Final placement and text of 2016 legislation is subject to editorial action of the Code Commissioner.


Please feel free to contact us should you have any questions, (334)242-2984 or 1-800-222-1253. For questions concerning broker-dealers, please contact Lisa Tolar, Registration Manager, or Investment Advisors, please contact Rena Davis, Audit Manager. Legal questions may be directed to Amanda Senn, General Counsel. For policy related questions, please contact Ed Reed, Deputy Director of Administration, or Joseph Borg, Director.