By Montgomery G. Griffin and Theodore S. Avery
It is a disturbing and unfortunate fact that senior citizens are among the most targeted groups for financial abuse. Indeed, it is estimated that seniors in the United States lose as much as $36.5 billion to financial exploitation annually, with many believing that such estimates are dramatically understated due to the fact that they rely on figures from reported cases of financial abuse—and as many as 44 out of 45 cases of elder financial abuse go unreported.
These statistics are no accident: seniors as a group have many qualities that make them ideal prey for financial abusers. After years of working and fostering nest eggs for retirement and legacy planning, seniors are likely to have relatively substantial savings. Additionally, seniors often have preoccupations (such as with medical challenges they or their friends and family might be facing), infirmities, technological challenges, travel itineraries, and other vulnerabilities that make them especially reliant on others and incapable of effectively protecting themselves and detecting misconduct. In short, exploiting seniors is profitable, easy to do, and easy to get away with, making it a prime practice for enterprising miscreants.
Ironically, and tragically, many of the qualities that make seniors vulnerable to financial abuse are also qualities that make them exceptionally sensitive to it. As they are usually retired, seniors frequently do not have a meaningful stream of income from work or other sources outside of their savings, meaning that it is inordinately difficult for them to recuperate losses. Additionally, as people age, their costs are liable to increase due to expenses like health care costs, long-term care needs, and an increased reliance on third-party professionals generally. The emotional toll that financial abuse can take on seniors also cannot be overstated. The anxiety, shame, confusion, and sense of isolation a senior may experience as a result of discovering financial abuse can place an enormous burden on him or her. In fact, the Securities Industry and Financial Markets Association (SIFMA)—the leading trade association for broker-dealers, investment banks and asset managers—has itself recognized that beyond mere economic losses, elder financial abuse frequently leads to loss of independence, reduced quality of life, poor health outcomes, and even self-harm and suicide.
Given the enormity of this problem, some states have taken the initiative of enacting special laws designed to thwart financial elder abuse and compensate its victims. Of special importance in the case of financial abuse at the hands of brokers and financial advisors, California and Florida—two states with significant senior populations—have enacted civil financial elder abuse laws that enable seniors to pursue enhanced remedies against their financial abusers.
California’s Elder Abuse Law
In California, pursuant to section 15610.30 of California’s Welfare and Institution’s Code, to demonstrate financial elder abuse, one must show that:
- The respondent (or defendant) engaged, or assisted, in taking, secreting, appropriating, obtaining, or retaining real or personal property. This element is deemed met whenever the elder is “deprived of any property right.” Cal Wel & Inst Code § 15610.30(d).
- Of an elder. An elder is defined as anyone age 65 or older. Cal Wel & Inst Code § 15610.27.
- For a wrongful use or with intend to defraud (or both). One takes property for a “wrongful use” if one “knew or should have known that [the] conduct is likely to be harmful to the elder . . . .” Cal Wel & Inst Code § 15610.30(b).
Given how broad the elements of financial elder abuse are under California law, almost all cases of broker and financial advisor misconduct against someone 65 or older in California are actionable as financial elder abuse.
If a claimant (or plaintiff) demonstrates financial elder abuse by a preponderance of the evidence, he or she is entitled to recovery of his or her reasonably attorneys’ fees and costs in addition to normal compensatory damages. Cal Wel & Inst Code § 15657.5(a).
California has also enacted Civil Code section 3345. Section 3345 states that in cases involving senior citizens where punitive damages are allowed (as they are in the case of a financial elder abuse action), the trier of fact should consider three factors:
- Whether the defendant knew or should have known that his or her conduct was directed to one or more senior citizens or disabled persons;
- Whether the defendant’s conduct caused one or more senior citizens or disabled persons to suffer . . . substantial loss of property set aside for retirement;
- Whether [the senior citizen] . . . [was] substantially more vulnerable than other members of the public to the defendant’s conduct because of age, poor health or infirmity, impaired understanding . . . [or] disability, and actually suffered . . . economic damage resulting from the defendant’s conduct.
It is a sad fact that many financial elder abuse cases match some or all of these factors as well. If the trier of fact (such as the panel of three arbitrators in a FINRA arbitration) makes an affirmative finding for any of the above factors, section 3345 permits the trier of fact to impose a penalty in the form of multiplying the damages it would otherwise award by three (i.e., trebling damages).
Florida’s Elder Abuse Law
Florida financial elder abuse law is similar to California but with some important differences. Florida Statute section 415.1111 provides that a “vulnerable adult who has been . . . exploited” may bring a financial elder abuse (or “exploitation”) action in Florida. Like California, if the vulnerable adult prevails, he or she is entitled to recover reasonable attorneys’ fees and costs in addition to normal compensatory (and potential punitive) damages. A “vulnerable adult” is defined as any person 18 years 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.” F.S. § 415.102(27) (bold added). “Exploitation” is defined as including breaches of fiduciary relationships, unauthorized taking of personal assets, misappropriation, misuse, or improper transfer of money. F.S. § 415.102(8). Thus, as in California, many cases of broker and financial advisor misconduct against a senior will be actionable as financial elder abuse in Florida, though there may be some additional hurdles in the form of having to demonstrate impairment due to “infirmities of aging” or the like under Florida law.
And these remedies are not merely theoretical in the world of broker and financial advisor misconduct; there are multiple examples where arbitration panels have significantly ratcheted up a damages award and specifically cited California or Florida’s financial elder abuse laws as their authority for doing so. For instance, in FINRA Arbitration No. 13-00549, the FINRA arbitration panel awarded attorneys’ fees and $1.54 million in costs and witness fees to the claimant, citing Florida Statute 415. More recently, in FIRNA Arbitration No. 16-00847, the panel awarded the claimant approximately $1.3 million in punitive damages and attorneys’ fees pursuant to California’s financial elder abuse laws. Accordingly, the Law Offices of Montgomery G. Griffin often pleads and pursues financial elder abuse damages in appropriate cases. Further, the firm makes special efforts to educate the arbitration panel on applicable elder abuse laws in appropriate cases so that the panel does not fail to recognize its power to award attorneys’ fees, punitive damages, and other enhanced damages.
If you are a senior and believe that you have been harmed as a result of broker or financial misconduct, do not hesitate to contact the Law Offices of Montgomery G. Griffin today.