Financial Institutions Law Alert

Governor Murphy has signed into law the “Safeguarding Against Financial Exploitation Act” (the Act) previously introduced on February 25, 2019 as Assembly Bill #5091. The Act provides that when a “qualified individual,” defined as any agent, investment adviser, representative or other person who serves in a supervisory, compliance, or legal capacity for a broker-dealer or investment adviser, believes that financial exploitation of an “eligible adult” (defined as a person 65 years of age or older or a person subject to the “Adult Protective Services Act”) has occurred or is being attempted, the qualified individual is obligated to notify the Bureau of Securities in the Division of Consumer Affairs in the Department of Law and Public Safety and the applicable county adult protective services provider. The qualified individual is also required to notify any third party previously designated by the eligible adult, unless the third party is the party suspected of the financial exploitation.

A broker-dealer or investment adviser may delay a disbursement from an account of an eligible adult or an account on which an eligible adult is a beneficiary when the disbursement may result in financial exploitation. The Act further requires the broker-dealer or investment adviser to provide access to or copies of records that are relevant to the suspected or attempted financial exploitation of an eligible adult to agencies charged with administering state adult protective services laws and to law enforcement and expressly protects those records from public disclosure as they are not deemed to be “public records” pursuant to N.J.S.A. 47:1A-1 et seq., the Open Public Records Act (OPRA). While such records are shielded from public disclosure under OPRA, the Act reserves to the Bureau of Securities the authority to access or examine the books and records of broker-dealer relevant to any matter, presumably including the suspected financial exploitation and the delayed disbursement.

While the Act does impose reporting and notice burdens on qualified persons, it does clothe such qualified individual who makes disclosure in good faith with immunity from administrative, civil or criminal liability. Importantly, a broker-dealer or investment adviser who delays a disbursement from an eligible person due to suspicions that financial exploitation is in play, is similarly immune from any administrative or civil liability that might otherwise arise from the delay in a disbursement in accordance with the Act. The standards to support such a delay in disbursement are clearly set forth in the Act.

The Act, which will take effect on the 90th day next following the date of enactment (mid-April), demonstrates the Murphy administration’s continued commitment to consumer protection, in particular to the vulnerable senior population.

Questions may be referred to Cynthia Borrelli or to another member of Bressler, Amery & Ross’ Senior and Vulnerable Investor Group.

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