SENATE BILL NO. 629

October 31, 2019, Introduced by Senator RUNESTAD and referred to the Committee on Insurance and Banking.

"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 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 vulnerable 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 VULNERABLE ADULTS

Sec. 531. As used in this article:

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

(b) "Financial exploitation" means any of the following:

(i) The wrongful or unauthorized taking, withholding, appropriation, or use of a vulnerable 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 vulnerable adult, to do any of the following:

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

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

Sec. 533. (1) A broker-dealer or investment advisor may place a temporary hold on a disbursement of funds or securities from an account of a vulnerable adult if all of the following are met:

(a) The broker-dealer or investment advisor reasonably believes that financial exploitation of the vulnerable 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 advisor first placed the temporary hold on the disbursement of funds or securities, the broker-dealer or investment advisor provides notification, orally, electronically, or in writing, 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 advisor reasonably believes that the party has engaged, is engaged, or will engage in the financial exploitation of the vulnerable adult.

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

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

(2) A temporary hold authorized under this section expires not later than 15 business days after the date that the broker-dealer or investment advisor first placed the temporary hold on the disbursement of funds or securities, unless otherwise terminated or extended by the administrator, another agency of competent jurisdiction, or a court of competent jurisdiction, or unless extended under subsection (3).

(3) If the broker-dealer's or investment advisor's internal review of the facts and circumstances under subsection (1)(c) supports the broker-dealer's or investment advisor's reasonable belief that the financial exploitation of the vulnerable adult has occurred, is occurring, has been attempted, or will be attempted, a broker-dealer or investment advisor may extend a temporary hold authorized under this section for no longer than 10 business days following the date authorized under subsection (2), unless otherwise terminated or extended by the administrator, another agency of competent jurisdiction, or a court of competent jurisdiction.

Sec. 535. A broker-dealer or investment advisor 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 disbursement that may constitute financial exploitation of a vulnerable 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.

(d) Any notifications provided to relevant parties under section 533(1)(b).

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

Sec. 537. A broker-dealer or investment advisor, or an agent of that broker-dealer or investment advisor, who exercises discretion in placing a temporary hold on disbursements of funds or securities from an account of a vulnerable adult in a manner that is consistent with the requirements of this article is immune from any administrative or civil liability that might otherwise arise under this act from such a delay in disbursement.

Sec. 539. (1) This article does not require a broker-dealer or investment advisor to place temporary holds on disbursements of funds or securities from the accounts of vulnerable adults.

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

(3) A broker-dealer's or investment advisor'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 advisor's business relationship with the individual.

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