12 U.S.C. § 5537: Senior investor protections

Summary

Creates a program that lets the Office of Financial Literacy give grants to States or certain state agencies to protect people 62 and older from salespeople or advisers who use fake or misleading credentials when selling financial products. Eligible entities are state securities agencies, state insurance agencies, or consumer protection agencies that the Office finds have adopted certain model rules. Financial product covers securities, insurance (including products that pay a return), bank products, and loans. A misleading designation is a certification or title that says or suggests special training for advising seniors, but it does not include accredited school degrees, certifications that meet certain model standards, or State-issued credentials. Misleading or fraudulent marketing means using such a designation when dealing with a senior. NASAA means the North American Securities Administrators Association. Grants may pay for hiring staff to find and bring cases, for technology, equipment, and training for regulators and prosecutors, for education for regulators and seniors, for statewide plans, and for changes to State law. Applicants must describe the problem, planned activities, how they will protect seniors and coordinate with other State efforts, and other information the Office asks for. The Office can set performance goals and reporting rules. Grants may be up to $500,000 per year for 3 consecutive fiscal years for recipients with both securities and insurance/annuity model rules, or up to $100,000 per year for 3 years for recipients with one set of those rules. Subgrants and reapplications are allowed. The law authorized $8,000,000 for each fiscal year 2011 through 2015.

Title 12, §5537

Banks and Banking, Source: USLM XML via OLRC

(a)Definitions

As used in this section

(1)

(2)the term “financial product” means a security, an insurance product (including an insurance product that pays a return, whether fixed or variable), a bank product, and a loan product;

(3)the term “misleading designation”—

(A)means a certification, professional designation, or other purported credential that indicates or implies that a salesperson or adviser has special certification or training in advising or servicing seniors; and

(B)does not include a certification, professional designation, license, or other credential that—

(i)was issued by or obtained from an academic institution having regional accreditation;

(ii)meets the standards for certifications and professional designations outlined by the NASAA Model Rule on the Use of Senior-Specific Certifications and Professional Designations (or any successor thereto) or by the Model Regulations on the Use of Senior-Specific Certifications and Professional Designations in the Sale of Life Insurance and Annuities, adopted by the National Association of Insurance Commissioners (or any successor thereto); or

(iii)was issued by or obtained from a State;

(4)the term “misleading or fraudulent marketing” means the use of a misleading designation by a person that sells to or advises a senior in connection with the sale of a financial product;

(5)the term “NASAA” means the North American Securities Administrators Association;

(6)the term “Office” means the Office of Financial Literacy of the Bureau;

(7)the term “senior” means any individual who has attained the age of 62 years or older; and

(8)the term “State” has the same meaning as in section 78c(a) of title 15.

(b)Grants to States for enhanced protection of seniors from being misled by false designations

The Office shall establish a program under which the Office may make grants to States or eligible entities—

(1)to hire staff to identify, investigate, and prosecute (through civil, administrative, or criminal enforcement actions) cases involving misleading or fraudulent marketing;

(2)to fund technology, equipment, and training for regulators, prosecutors, and law enforcement officers, in order to identify salespersons and advisers who target seniors through the use of misleading designations;

(3)to fund technology, equipment, and training for prosecutors to increase the successful prosecution of salespersons and advisers who target seniors with the use of misleading designations;

(4)to provide educational materials and training to regulators on the appropriateness of the use of designations by salespersons and advisers in connection with the sale and marketing of financial products;

(5)to provide educational materials and training to seniors to increase awareness and understanding of misleading or fraudulent marketing;

(6)to develop comprehensive plans to combat misleading or fraudulent marketing of financial products to seniors; and

(7)to enhance provisions of State law to provide protection for seniors against misleading or fraudulent marketing.

(c)Applications

A State or eligible entity desiring a grant under this section shall submit an application to the Office, in such form and in such a manner as the Office may determine, that includes—

(1)a proposal for activities to protect seniors from misleading or fraudulent marketing that are proposed to be funded using a grant under this section, including—

(A)an identification of the scope of the problem of misleading or fraudulent marketing in the State;

(B)a description of how the proposed activities would—

(i)protect seniors from misleading or fraudulent marketing in the sale of financial products, including by proactively identifying victims of misleading and fraudulent marketing who are seniors;

(ii)assist in the investigation and prosecution of those using misleading or fraudulent marketing; and

(iii)discourage and reduce cases of misleading or fraudulent marketing; and

(C)a description of how the proposed activities would be coordinated with other State efforts; and

(2)any other information, as the Office determines is appropriate.

(d)Performance objectives and reporting requirements

The Office may establish such performance objectives and reporting requirements for States and eligible entities receiving a grant under this section as the Office determines are necessary to carry out and assess the effectiveness of the program under this section.

(e)Maximum amount

The amount of a grant under this section may not exceed—

(1)$500,000 for each of 3 consecutive fiscal years, if the recipient is a State, or an eligible entity of a State, that has adopted rules—

(A)on the appropriate use of designations in the offer or sale of securities or investment advice that meet or exceed the minimum requirements of the NASAA Model Rule on the Use of Senior-Specific Certifications and Professional Designations (or any successor thereto);

(B)on the appropriate use of designations in the sale of insurance products that, to the extent practicable, conform to the minimum requirements of the National Association of Insurance Commissioners Model Regulation on the Use of Senior-Specific Certifications and Professional Designations in the Sale of Life Insurance and Annuities (or any successor thereto); and

(C)with respect to fiduciary or suitability requirements in the sale of annuities that meet or exceed the minimum requirements established by the Suitability in Annuity Transactions Model Regulation of the National Association of Insurance Commissioners (or any successor thereto); and

(2)$100,000 for each of 3 consecutive fiscal years, if the recipient is a State, or an eligible entity of a State, that has adopted—

(A)rules on the appropriate use of designations in the offer or sale of securities or investment advice that meet or exceed the minimum requirements of the NASAA Model Rule on the Use of Senior-Specific Certifications and Professional Designations (or any successor thereto); or

(B)rules—

(i)on the appropriate use of designations in the sale of insurance products that, to the extent practicable, conform to the minimum requirements of the National Association of Insurance Commissioners Model Regulation on the Use of Senior-Specific Certifications and Professional Designations in the Sale of Life Insurance and Annuities (or any successor thereto); and

(ii)with respect to fiduciary or suitability requirements in the sale of annuities that meet or exceed the minimum requirements established by the Suitability in Annuity Transactions Model Regulation of the National Association of Insurance Commissioners (or any successor thereto).

(f)Subgrants

A State or eligible entity that receives a grant under this section may make a subgrant, as the State or eligible entity determines is necessary to carry out the activities funded using a grant under this section.

(g)Reapplication

A State or eligible entity that receives a grant under this section may reapply for a grant under this section, notwithstanding the limitations on grant amounts under subsection (e).

(h)Authorization of appropriations

There are authorized to be appropriated to carry out this section, $8,000,000 for each of fiscal years 2011 through 2015.

Notes & Related Subsidiaries

Editorial Notes

Codification Section was not enacted as part of subtitle C of title X of Pub. L. 111–203, which comprises this part.

Statutory Notes and Related Subsidiaries

Effective Date

Section effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as a note under section 5301 of this title.

§5537 Senior Investor Protections