NH Bill Regarding Estate Planning Goes into Effect on Sept. 8
An amendment to New Hampshire’s Uniform Securities Act aimed at preventing
financial exploitation of those over 65 and “vulnerable” adults
goes into effect on Sept. 8, 2019. SB 252 will affect Granite State investors
who are over 65, family members of older and vulnerable individuals, and
investment advisors and broker-dealers.
Synopsis: Investment advisors or broker-dealers who suspect financial exploitation
in the estate planning of elders and vulnerable adults can now report
these concerns to New Hampshire’s secretary of state so long as
they are acting in good faith and exercising reasonable care. Alternately,
if investment advisors and broker-dealers have a reasonable belief that
a requested disbursement may result in financial exploitation, the investment
advisor or broker-dealer may
delay the requested disbursement.
The law (read the full text
here) provides timeframes and procedures to follow and can affect concerned
parties and their relationships with each other in different ways.
Investors: Added Protection, Less Privacy
Protections gained: Investors may applaud the additional protections afforded by the ability
of investment advisors and broker-dealers to report potential financial
Privacy lost: Investors may resent being treated differently based on their age or status
as a “vulnerable” adult under the statute. An elderly investor
who finds new love late in life may decide to engage in an uncharacteristic
pattern of spending on his or her significant other, but that may not
mean exploitation is taking place. Why should an investor’s wishes,
no matter how incongruous, be subject to potential delay just because
that investor is over 65?
Family Members: Gaining Eyes Outside the Family Circle
Family members may be relieved that investment advisors and broker-dealers
can serve as an additional set of eyes and an additional reporter, outside
the family circle, regarding suspected financial abuse.
However, a family member with good intentions could nevertheless be reported
by an investment advisor or broker-dealer. All too often, an older family
member loses the capacity to manage his or her affairs before he or she
signs a Durable Power of Attorney for Finances. Checks start to be signed
in different handwriting, and other family members understand the managing
family member is carrying out what the older person would have “wished.”
These actions can meet the definition of “financial exploitation”
under this statute, which includes the “unauthorized taking, withholding,
appropriation, or use of money, assets or property of an eligible adult.”
Investment Advisors & Broker-Dealers: New Responsibilities & Procedures
Investment advisors and broker-dealers may feel relief to have options
from the state of New Hampshire, in addition to the options under FINRA
Rule 2165, when they suspect financial exploitation of their clients,
and may appreciate being shielded from civil liability in the event they
make a report made in good faith, exercising reasonable care.
Operationally, the new statute will require the following action steps:
- Specific internal review procedures will need to be developed to answer
the question: Does the investment advisor have a “reasonable belief”
the disbursement “may result in financial exploitation of an eligible
- Advisor-client agreements should be updated to advise clients that suspected
financial exploitation meeting the standard may be reported to the secretary
of state of New Hampshire, and that suspect disbursements may be delayed.
Written Notices regarding delays in requested disbursement for suspected financial abuse
should be developed.
Policies and Procedures manuals should be updated.
- Reports are protected if they are made “in good faith, exercising
reasonable care,” so guidelines should be promulgated to ensure
reports meet that legal standard.
- It is essential for every investment advisor and broker-dealer to understand
that if he or she delays a disbursement for review, he or she must turn
over the results of their internal report to the New Hampshire Secretary
of State within seven days.
- The investment advisor or broker-dealer who rejects a transaction must
understand he or she could be called to testify as a fact witness in any
civil or criminal prosecution of the malefactor.
- Consideration should be given to the reality that reporting a transaction
that is later upheld as legitimate will likely have a chilling effect
on the client relationship.
For more information on the new section of the Uniform Securities Act,
or to address any of your
estate planning, probate litigation, trust and estate administration, or elder law needs, contact: