Josh D. Jones is the managing principal of Bressler, Amery & Ross’s Alabama office and a leader within the greater firm platform. He is a co-manager of Bressler's Senior and Vulnerable Investor Group, whose lawyers provide advisory solutions and litigation support for investment advisers, broker dealers, and other financial institutions confronting senior and vulnerable investor issues.

In a JD Supra exclusive, Jones shared his passion for preventing the financial exploitation of seniors and vulnerable adults and what investors and their financial advisors can do to prevent it.

How did you come about practicing law in the arena of preventing financial exploitation of seniors and vulnerable adults?

I'm a litigator by trade, specializing in defending brokerage firms when they get sued by their clients. Several Bressler attorneys and I got together and started talking about ways that we could better represent our clients. One obvious and growing area of need was in the senior and vulnerable investor space. We're consistently seeing cases that involve issues relating to seniors including financial exploitation, beneficiary disputes, and cases involving competency issues.

"We're consistently seeing cases that involve issues relating to seniors..."

These cases can be problems for firms to defend and obviously they're problems for the people that are being taken advantage of and for families that are dealing with these issues. So, we asked ourselves what we could do to help firms in this area. We can litigate these issues and defend firms in court or arbitration, but at the same time, a number of the issues that we're seeing lend themselves to prevention, whether it's through training or working with clients to adopt policies and procedures designed to prevent issues before they arise.

The Senior and Vulnerable Investor Group grew out of that litigation experience and a lot of what we do has to do with pre-litigation counseling, whether that's assisting clients with reporting issues that often come up in these cases or coordinating with clients to limit problematic transactions or money that's going out the door.

With laws differing in the 50 states, are there resources available for investment advisors and broker dealers to navigate senior and vulnerable investor laws?

There are, and that's one of the things I like about this space is that no one wants to see seniors financially exploited. No one wants to see seniors defrauded of their life savings. Whether it's the regulators, the defense bar like myself, or industry and consumer advocate groups, everyone is on the same page that we need to work to prevent such fraud and lessen its effects of it on seniors. One of the most active players in this space is the North American Securities Administrator Association (NASAA) which is putting out accessible information and training.

Our biggest contribution is the Senior and Vulnerable Investor Issues 50-state Map. We put $250,000 worth of attorney time into building the map into a go-to resource and then we made it openly accessible to the industry, regulators, and even our competitors. It provides up-to-date reporting requirements and related information from the 50 states and a number of territories. Included in that is a summary of two different types of laws; those that outline protections offered by a state’s Department of Adult Protective Services and various “report and Hold” laws that grew out of NASAA’s Model Act to Protect Vulnerable Adults from Financial Exploitation which has been adopted in some form by more than 35 states.

Those acts are specific to brokerage firms and investment advisers, and they allow firms to put restrictions on transfers of money leaving the firm, and often on securities transactions within the account. When the states have adopted them, they've not adopted the NASAA Model Act precisely as written. Rather, each state makes changes. For example, some states require reporting, some states allow reporting, the manner of reporting varies by state, and there are differences in training and recordkeeping requirements. What we've done in the Senior and Vulnerable Investor Issues 50-state Map is provide regularly updated summaries of those laws, links to the reporting information, and other relevant information by state and territory.

What are some of the unique financial industry concerns related to seniors and vulnerable adults?

As people age, their brains change which affects the decision-making process. Researchers have found in some instances as people age, they become more tolerant of risk. Or that they don't appreciate the downside of the risk as much as they did prior to their brain changing in this way. The science in this area is developing every day and it is important for us to think about what those developments mean for the industry and its efforts to protect seniors.

"...in some instances as people age, they become more tolerant of risk."

Another aspect that I'm also really interested in is the balance between investor autonomy and investor protection. Just because someone turns 60 or 65 or whatever the age is in the law doesn't mean that they lose the ability to decide what they want to do with their money. That may be something that their children don't agree with or that their financial advisor doesn't agree with. But if they have the capacity to make those decisions, those decisions are their decisions, it's their money.

At the same time, the industry, regulatory agencies, and lawmakers are concerned with how to protect people from being defrauded, particularly people that have lost the capacity to fully appreciate the ramifications of their decisions. So, how do you balance that kind of right to do what you want to with the desire to protect people? On that question, one of the easiest things to point to is the privacy concern. A lot of these new acts are saying, "Okay, you can contact someone who has been designated by the senior as a trusted contact, or in some other capacity such as a power of attorney." But a lot of the states are going beyond that and are saying, "You can contact those people, and you can also contact anyone that you reasonably believe to be associated with the account."

Obviously, these laws would provide firms with grounds to reach out to an expanded group of people but, at the same time, they’re going to want to be cognizant of their client’s reasonable privacy expectations and how to respect them.

How does estate planning and administration and trust and estates litigation play a role in what you do in seniors and vulnerable adults work?

We're largely focused on brokerage firms and registered investment advisors and other financial institutions, so that's kind of the perspective that we look at this from. Now, there are other groups within the firm that handle estate planning. It's all part of a bigger picture, and often, in exploitation cases, you'll sometimes see sudden changes to estate planning documents, whether it's a new will, whether it's a change in beneficiary or something along those lines. That can be a red flag for potential exploitation, so you've got to be cognizant of that.

"At some point you’re going to have to address capacity issues and concerns with potential financial exploitation..."

As far as trust litigation, fiduciary litigation, and other similar areas, that's often what we're trying to prevent firms from being pulled into, those types of disputes. But we are willing and capable of handling them when they arise.

What can investors and their financial advisors do to prevent the financial exploitation of seniors and vulnerable adults?

Every time I provide training or give a presentation to financial advisors, I say, "There's someone in this crowd who's thinking, ‘This sounds like Mrs. so and so, I really should be thinking about her situation and whether we need to get someone else involved.’” And if you're an advisor and you haven't seen this issue yet, you will.

At some point you’re going to have to address capacity issues and concerns with potential financial exploitation. The main thing I tell advisors is to be on the lookout for and part of that is reading articles, attending seminars, etc., that help to develop an understanding of the red flags to look for.

When you see something, say something.

Most of the firms that we work with are on the larger side but even if you're a small shop, there's likely a compliance officer within the firm somewhere who is going to listen to you if you pick up the phone or shoot an email and say, "Hey, I have a concern about this senior investor."

Think about it, look for it and when you see it, raise it with others.

With respect to clients, it's something that I encourage adult children to look for as their parents age. I saw something the other day with someone that I'm close to and it was simple, it was the Amazon text, "Hey, your Amazon account has been hacked. You need to click on this link." I knew it was phishing and that the person’s account hadn’t been hacked.

"...the federal government could create a tool for the uniform reporting of senior exploitation: a database or platform..."

Everyone should have digital security and electronic privacy conversations with their family members and loved ones. Firms are doing that as well.

What haven’t we asked you that we should have asked?

What more can be done? One thing is that the federal government could create a tool for the uniform reporting of senior exploitation: a database or platform to coordinate and streamline a process.

Congress has passed some legislation that allows for reporting but there is nothing designed to provide for use by firms in reporting exploitation or coordinating with each other or the multiple regulators who might be interested. We’ve done this in the anti-money laundering space and should think about how to do it here.