Michigan-2021-SB0315-Engrossed

Substitute For

SENATE BILL NO. 315

A bill to amend 2008 PA 551, entitled

"Uniform securities act (2002),"

(MCL 451.2101 to 451.2703) by amending the title, as amended by 2014 PA 355, and by adding article 5A.

the people of the state of michigan enact:

TITLE

An act to enact the uniform securities act (2002) relating to the issuance, offer, sale, or purchase of securities; to prohibit fraudulent practices in relation to securities; to establish civil and criminal sanctions for violations of the act and civil sanctions for violation of the rules promulgated pursuant to under the act; to require the registration of broker-dealers, agents, investment advisers, and securities; to regulate Michigan investment markets; to make uniform the law with reference to securities; to authorize certain actions to protect certain specified adults from financial exploitation; to prescribe the powers and duties of certain state governmental officers and agencies; and to repeal acts and parts of acts.

ARTICLE 5A

FINANCIAL EXPLOITATION OF SPECIFIED ADULTS

Sec. 531. As used in this article:

(a) "Account" means any account with a broker-dealer or investment adviser for which a specified adult has the authority to transact business.

(b) "Agency of competent jurisdiction" means an entity authorized to investigate or review suspicions of abuse or exploitation, including, but not limited to, adult protective services and law enforcement.

(i) The wrongful or unauthorized taking, withholding, appropriation, or use of a specified adult's funds or securities.

(ii) Any act or omission by a person, including through the use of a power of attorney, guardianship, or any other authority regarding a specified adult, to do either of the following:

(A) Obtain control, through deception, intimidation, or undue influence, over the specified adult's money, assets, or property.

(B) Convert the specified adult's money, assets, or property.

(d) "Specified adult" means either of the following:

(i) An individual who is 65 years of age or older.

(ii) An individual who is 18 years of age or older and who the broker-dealer or investment adviser reasonably believes has a mental or physical impairment that renders the individual unable to protect his or her own interests.

Sec. 533. (1) A broker-dealer or investment adviser may place a temporary hold on a disbursement of funds or securities from an account of a specified adult, or any other transaction concerning that account, if all of the following are met:

(a) The broker-dealer or investment adviser reasonably believes that financial exploitation of the specified adult has occurred, is occurring, has been attempted, or will be attempted.

(b) Within 2 business days after the date that the broker-dealer or investment adviser first placed the temporary hold on the disbursement of funds or securities, or other transaction, the broker-dealer or investment adviser provides notification, electronically or in writing, that is maintained as correspondence under section 411(3), of the reason for the temporary hold to all of the following:

(i) All parties who are authorized to transact business on the account, unless a party is unavailable or the broker-dealer or investment adviser reasonably believes that the party has engaged, is engaged, or will engage in the financial exploitation of the specified adult.

(ii) To any individual who the specified adult has previously designated as authorized to receive information about the account, unless that individual is unavailable or the broker-dealer or investment adviser reasonably believes that the individual has engaged, is engaged, or will engage in the financial exploitation of the specified adult.

(iii) An agency of competent jurisdiction.

(c) The broker-dealer or investment adviser immediately initiates an internal review of the facts and circumstances that caused the broker-dealer or investment adviser to reasonably believe that the financial exploitation of the specified adult has occurred, is occurring, has been attempted, or will be attempted.

(2) If a broker-dealer or investment adviser reasonably believes that financial exploitation of a specified adult may have occurred, may have been attempted, or is being attempted, a broker-dealer or investment adviser may provide notification of that financial exploitation to any of the following:

(a) The administrator.

(b) An agency of competent jurisdiction.

(c) A reasonably associated individual, unless that individual is unavailable or the broker-dealer or investment adviser reasonably believes that the individual has engaged, is engaged, or will engage in the financial exploitation of the specified adult.

(d) Any third party previously designated by the specified adult to receive information about the account, unless that individual is unavailable or the broker-dealer or investment adviser reasonably believes that the individual has engaged, is engaged, or will engage in the financial exploitation of the specified adult.

(3) A temporary hold authorized under this section expires on either of the following:

(a) The day a broker-dealer or investment adviser determines that the disbursement or transaction will not result in financial exploitation of the specified adult.

(b) Not later than 15 business days after the date that the broker-dealer or investment adviser first placed the temporary hold on the disbursement of funds or securities, or other transaction, unless otherwise terminated or extended by the administrator, another agency of competent jurisdiction, or a court of competent jurisdiction, or unless extended under subsection (4).

(4) If the broker-dealer's or investment adviser's internal review of the facts and circumstances under subsection (1)(c) supports the broker-dealer's or investment adviser's reasonable belief that the financial exploitation of the specified adult has occurred, is occurring, has been attempted, or will be attempted, a broker-dealer or investment adviser may extend a temporary hold authorized under this section for not longer than 40 business days following the date authorized under subsection (3)(b), unless otherwise terminated or extended by the administrator, another agency of competent jurisdiction, or a court of competent jurisdiction.

(5) Subsections (3) and (4) do not require the administrator to extend or terminate a temporary hold authorized under this section.

Sec. 535. (1) A broker-dealer or investment adviser that takes action under this article shall establish and maintain written procedures reasonably designed to achieve compliance with this article, including, but not limited to, procedures related to the identification, escalation, and reporting of matters related to the financial exploitation of specified adults.

(2) The procedures required under subsection (1) must identify the title of each individual who is authorized to place, terminate, or extend a temporary hold on behalf of the broker-dealer or investment adviser under this article. Only an individual who serves in a supervisory, compliance, legal, or senior or vulnerable investor protection capacity for the broker-dealer or investment adviser is eligible for identification as an authorized individual under this subsection.

Sec. 537. (1) Subject to 15 USC 78o(i)(1) and 15 USC 80b-18a, and subject to the record-keeping requirements provided in section 411, a broker-dealer or investment adviser shall retain records related to compliance with this article and ensure that those records are readily available to the department on request. The retained records must include records of all of the following:

(a) Any requests for a disbursement or other transaction that a broker-dealer or investment adviser reasonably believed to constitute financial exploitation of a specified adult and the resulting temporary hold.

(b) Any finding of a reasonable belief that financial exploitation has occurred, is occurring, has been attempted, or will be attempted underlying a decision to place a temporary hold on a disbursement or other transaction.

(d) Any notifications to relevant parties under section 533.

(e) Any internal review of the facts and circumstances conducted under section 533(1)(c).

(2) A broker-dealer or investment adviser shall provide access to or copies of the records retained under subsection (1) to agencies of this state charged with administering state adult protective services laws and to law enforcement, either as part of a referral to the agency or to law enforcement, or upon request of the agency or law enforcement pursuant to an investigation. The records may include historical records as well as records relating to the most recent transaction or transactions that may comprise financial exploitation or suspected financial exploitation of a specified adult. All records made available to agencies or law enforcement under this subsection are not subject to the freedom of information act, 1976 PA 442, MCL 15.231 to 15.246. This subsection does not limit or otherwise impede the authority of the administrator to access or examine the books and records of broker-dealers and investment advisers as otherwise provided by law.

Sec. 539. Notwithstanding any provision of law to the contrary, an agency of competent jurisdiction may disclose to any reporting or notifying broker-dealer or investment adviser the general status or final disposition of an investigation that arose from a report made by the broker-dealer or investment adviser.

Sec. 541. (1) This article does not require a broker-dealer or investment adviser to place temporary holds on disbursements of funds or securities from the accounts of specified adults or other transactions concerning those accounts.

(2) A broker-dealer or investment adviser that relies on this article shall develop and document training policies or programs reasonably designed to ensure that the broker-dealer or investment adviser complies with the requirements of this article.

(3) A broker-dealer's or investment adviser's reasonable belief that an individual who is 18 years of age or older has a mental or physical impairment that renders the individual unable to protect his or her own interests may be based on the facts and circumstances observed in the broker-dealer's or investment adviser's business relationship with that individual.

Sec. 543. A broker-dealer or investment adviser that exercises good faith in making disclosures, placing a temporary hold, or providing access to records pursuant to this article is immune from any administrative or civil liability that might otherwise arise from those activities.

Enacting section 1. This amendatory act takes effect 90 days after the date it is enacted into law.