Florida Governor Ron DeSantis has signed historic legislation that is designed to protect vulnerable investors from financial exploitation. Section 517.34 of the Florida Statutes, which is entitled, “Protection of Specified Adults,” takes effect on July 1, 2020. Florida, which has one of the largest populations of senior investors in the county, becomes the latest state to enact a report and hold law. The legislation is a multi-year, collaborative effort undertaken by the Florida Securities Dealers Association, Financial Services Institute, SIFMA and other industry organizations, working alongside the Florida Office of Financial Regulation and the Elder Law Section of The Florida Bar.
The legislation defines a “specified adult” as a person who is 65 years of age or older, or a vulnerable adult as defined in Section 415.102 of the Florida Statutes. This latter provision defines a vulnerable adult as “a person 18 years of age or older whose ability to perform the normal activities of daily living or to provide for his or her own care or protection is impaired due to a mental, emotional, sensory, long-term physical, or developmental disability or dysfunction, or brain damage, or the infirmities of aging.” §415.102(28), Fla. Stat. (2019). The new legislation contains a strong statement of legislative intent, recognizing the freedom of individuals covered by the statute to manage assets, make investment decisions, and spend their funds as they see fit, but at the same time providing for their protection by enacting legislation designed to prevent financial exploitation of the persons covered by this statute.
The statute applies to both disbursements and transactions, and allows a securities dealer or investment adviser to delay a transaction or disbursement if the dealer or investment adviser reasonably believes that financial exploitation has occurred, is occurring, has been attempted, or will be attempted in connection with the disbursement or transaction at issue. The delay expires 15 business days after the date on which it first was placed, although the securities dealer or investment adviser may extend the delay for an additional 10 business days if review of available facts and circumstances continues to support a reasonable belief of financial exploitation.
Within three business days after the date on which the delay first was placed, the securities dealer or investment adviser must notify in writing all persons authorized to transact business on the account and any trusted contact on the account unless the securities dealer or investment adviser reasonably believes that the person to be contacted is the person engaged in the suspected financial exploitation. In addition, not later than three days after the delay was first placed, the securities dealer or investment adviser must notify the Florida Office of Financial Regulation of the delay electronically on a form prescribed by OFR Rules. The securities dealer or investment adviser also must provide such notice within three days of extending the delay. The statute defines the parameters of information that the report form may contain.
To act under new Section 517.34 a dealer or investment adviser must develop training policies, conduct training, and develop, maintain and enforce written procedures. A securities dealer, investment adviser or associated person who complies with new section 517.34, in good faith and exercising reasonable care, is immune from any administrative or civil liability.
With the adoption of Section 517.34 of the Florida Statutes, Florida becomes the 30th state with a law or regulation relating to financial exploitation.