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 exploitation.
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” that disbursement “may result in financial exploitation of an eligible adult?”
- 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:
- Benjamin T. Siracusa Hillman, Esq., Chair, Estate Planning, Elder Law, Probate and Trust Group, in Concord – (603) 605-8361