[Congressional Record Volume 169, Number 19 (Monday, January 30, 2023)]
[House]
[Pages H498-H501]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             FINANCIAL EXPLOITATION PREVENTION ACT OF 2023

  Mr. McHENRY. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 500) to amend the Investment Company Act of 1940 to postpone 
the date of payment or satisfaction upon redemption of certain 
securities in the case of the financial exploitation of specified 
adults, and for other purposes.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                                H.R. 500

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Financial Exploitation 
     Prevention Act of 2023''.

     SEC. 2. REDEMPTION OF CERTAIN SECURITIES POSTPONED.

       (a) In General.--Section 22 of the Investment Company Act 
     of 1940 (15 U.S.C. 80a-22) is amended by adding at the end 
     the following:
       ``(h) Requirements With Respect to Non-Institutional Direct 
     At-Fund Accounts.--
       ``(1) Election.--
       ``(A) In general.--A registered open-end investment company 
     and a transfer agent described under paragraph (2) may elect 
     to comply with the requirements under paragraph (2) and 
     subsection (i) by notifying the Commission of such election.
       ``(B) Effect of election.--Paragraph (2) and subsection (i) 
     shall only apply to a registered open-end investment company 
     and a transfer agent that have made the election under 
     subparagraph (A).
       ``(2) Requirements.--In the case of a customer who is a 
     holder of a non-institutional account held directly with a 
     registered open-end investment company and serviced by a 
     transfer agent (a `direct-at-fund account'), the company and 
     transfer agent shall--
       ``(A) request from such customer the name and contact 
     information of at least one individual who--
       ``(i) is at the time of such request an adult; and
       ``(ii) may be contacted with respect to such account;
       ``(B) document and retain the information received pursuant 
     to subparagraph (A); and
       ``(C) disclose to such customer in writing (including 
     through electronic delivery) that such company or transfer 
     agent may contact an individual specified pursuant to 
     subparagraph (A) with respect to the account of such customer 
     to--
       ``(i) address possible financial exploitation of such 
     customer;
       ``(ii) confirm the contact information or health status of 
     the customer; or
       ``(iii) identify any legal guardian, executor, trustee, or 
     holder of a power of attorney of the customer.
       ``(i) Redemption of Certain Securities Postponed.--
       ``(1) In general.--Notwithstanding subsection (e), a 
     registered open-end investment company or a transfer agent 
     acting on behalf of such company may postpone the date of 
     payment or satisfaction upon redemption of any redeemable 
     security in accordance with its terms for more than seven 
     days after the tender of such security to such company or its 
     agent designated for that purpose for redemption if such 
     company or agent reasonably believes that--
       ``(A) the redemption is requested by a security holder who 
     is a specified adult; and
       ``(B) financial exploitation has occurred, is occurring, or 
     has been attempted with respect to such redemption.
       ``(2) Duration.--
       ``(A) In general.--Except as provided in subparagraphs (B) 
     and (C), a registered open-end investment company or a 
     transfer agent acting on behalf of such company may postpone 
     the date of payment or satisfaction upon redemption of a 
     redeemable security under paragraph (1) for a period of not 
     more than 15 business days.
       ``(B) Extension upon determination of exploitation.--The 
     period described in subparagraph (A) may be extended by an 
     additional 10 business days if the registered open-end 
     investment company or a transfer agent acting on behalf of 
     such company--
       ``(i) reasonably believes that--

       ``(I) the redemption is requested by a security holder who 
     is a specified adult; and
       ``(II) financial exploitation has occurred, is occurring, 
     or has been attempted with respect to such redemption;

       ``(ii) subject to subparagraph (D), not later than 2 days 
     after making a determination under clause (i), notifies the 
     individuals specified by such security holder under 
     subsection (h)(2)(A) in writing (including through electronic 
     delivery) of the extension of the period described in 
     subparagraph (A) under this subparagraph and the reason for 
     such extension;
       ``(iii) initiates an internal review of the facts and 
     circumstances relating to the determination under clause (i);
       ``(iv) holds amounts related to the delayed payment or 
     satisfaction upon redemption of the redeemable security in a 
     demand deposit account; and
       ``(v) documents and retains records related to carrying out 
     clause (iv) and includes such records in the first required 
     account statement of the security holder provided after the 
     date on which the determination is made under clause (i).
       ``(C) Extension by government.--A State regulator, 
     administrative agency of competent jurisdiction, or court of 
     competent jurisdiction may extend the period described in 
     subparagraph (A).
       ``(D) Notification.--
       ``(i) Exception.--Subparagraph (B)(ii) shall not apply if a 
     registered open-end investment company or transfer agent 
     acting on behalf of such company reasonably believes that an 
     individual required to be notified under such subparagraph 
     is, has been, or will subject the security holder who 
     identified such individual under subsection (h)(2)(A) to 
     financial exploitation.
       ``(ii) Reasonable efforts.--An open-end investment company 
     or transfer agent acting on behalf of such company shall be 
     considered in compliance with subparagraph (B)(ii) if such 
     company or transfer agent makes a reasonable effort to 
     contact the individuals specified by a security holder under 
     subsection (h)(2)(A).
       ``(E) Internal procedures.--An open-end investment company 
     or transfer agent acting on behalf of such company shall 
     establish procedures to carry out the requirements under this 
     subsection, including procedures--
       ``(i) related to the identification and reporting of 
     matters related to the financial exploitation of specified 
     adults;
       ``(ii) to determine whether to release or reinvest delayed 
     redemption proceeds, taking into account the facts and 
     circumstances of each case, should the internal review under 
     subparagraph (B)(iii) support the reasonable belief described 
     in subparagraph (B)(i);
       ``(iii) identifying each employee of the company or 
     transfer agent with authority to establish, extend, or 
     terminate a period described in paragraph (1) or subparagraph 
     (A);
       ``(iv) in the case of a transfer agent, that are reasonably 
     designed to ensure that the employees of such transfer agent 
     comply with this subsection; and

[[Page H499]]

       ``(v) in the case of an open-end investment company, 
     establishing periodic reporting requirements under which a 
     transfer agent acting on behalf of such company shall notify 
     such company of--

       ``(I) each extension under subparagraph (B) authorized by 
     such transfer agent;
       ``(II) each finding by the transfer agent under 
     subparagraph (B)(i);
       ``(III) each notification under subparagraph (B)(ii) 
     carried out by such transfer agent; and
       ``(IV) the results of each internal review initiated by the 
     transfer agent under subparagraph (B)(iii).

       ``(F) Information included in certain statements.--An open-
     end investment company shall include in each prospectus or 
     statement of additional information a notification that the 
     company or transfer agent acting on behalf of such company 
     may postpone redemption of certain securities under this 
     subsection.
       ``(G) Record retention.--An open-end investment company or 
     transfer agent acting on behalf of such company shall--
       ``(i) document and retain records of--

       ``(I) each postponement of redemption under subparagraph 
     (A), (B), and (C);
       ``(II) each finding under subparagraph (B)(i);
       ``(III) the name and position of each employee described in 
     subparagraph (E)(iii);
       ``(IV) each notification carried out under subparagraph 
     (B)(ii); and
       ``(V) the results of each internal review initiated under 
     subparagraph (B)(iii); and

       ``(ii) make such records available to the Commission at the 
     request of the Commission.
       ``(3) Specified adult defined.--In this subsection, the 
     term `specified adult' means--
       ``(A) an individual age 65 or older; or
       ``(B) an individual age 18 or older who a registered open-
     end investment company or a transfer agent acting on behalf 
     of such company reasonably believes has a mental or physical 
     impairment that renders the individual unable to protect the 
     individual's own interests.''.
       (b) Recommendations.--
       (1) In general.--Not later than 1 year after the date of 
     the enactment of this section, the Securities and Exchange 
     Commission, in consultation with the entities specified in 
     paragraph (2), shall submit to Congress a report that 
     includes recommendations regarding the regulatory and 
     legislative changes necessary to address the financial 
     exploitation of security holders who are specified adults (as 
     defined in subsection (i)(3) of section 22 of the Investment 
     Company Act of 1940 (15 U.S.C. 80a-22), as added by this 
     section).
       (2) Consultation.--The entities specified in this paragraph 
     are as follows:
       (A) The Commodity Futures Trading Commission.
       (B) The Director of the Bureau of Consumer Financial 
     Protection.
       (C) The Financial Industry Regulatory Authority.
       (D) The North American Securities Administrators 
     Association.
       (E) The Board of Governors of the Federal Reserve System.
       (F) The Comptroller of the Currency.
       (G) The Federal Deposit Insurance Corporation.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
North Carolina (Mr. McHenry) and the gentlewoman from California (Ms. 
Waters) each will control 20 minutes.
  The Chair recognizes the gentleman from North Carolina.


                             General Leave

  Mr. McHENRY. Mr. Speaker, I ask unanimous consent that all Members 
may have 5 legislative days in which to revise and extend their remarks 
and include extraneous material on this bill.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from North Carolina?
  There was no objection.
  Mr. McHENRY. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise in support of H.R. 500, the Financial 
Exploitation Prevention Act, a bipartisan bill that will help combat 
the financial exploitation of our seniors and other vulnerable adults.
  I thank the gentlewoman from Missouri (Mrs. Wagner), the new chair of 
the Subcommittee on Capital Markets, for her work on this bill.
  Financial exploitation, particularly of seniors and other vulnerable 
adults, is a serious and growing issue. Consider this: The number of 
Americans age 65 and older is projected to nearly double from 52 
million in 2018 to 95 million by 2060. At the same time, the 65 and 
older age group's share of the total population is predicted to rise 
from 16 percent to 23 percent. Right now, approximately 44 percent of 
households are headed by a baby boomer, and 30 percent of Silent 
Generation and GI Generation households own mutual funds.
  As more and more investors transition into retirement, the risk of 
financial exploitation for older households will only increase. Right 
now, roughly one in five senior investors already fall prey to 
fraudsters, losing an estimated $2.9 billion annually. Those are just 
the cases we know about. Unfortunately, there is research that shows 
only 1 in 44 cases of financial abuse is ever reported.
  This bill provides a tool to fight against this type of elder abuse.
  Some mutual fund shareholder accounts are held directly with the 
mutual fund and serviced by the fund's transfer agent, otherwise known 
as direct-at-fund accounts. The transfer agent is typically responsible 
for opening and servicing the accounts, managing account records, and 
serving as the fund's point of contact with those shareholders.
  Under current law, when a funds transfer agent suspects financial 
exploitation in a direct-at-fund account, it cannot lawfully delay the 
disbursement or redemption proceeds while an investigation occurs. This 
bill would codify a 2018 Securities and Exchange Commission-issued no-
action letter that permits a mutual fund and its transfer agent to 
delay the redemption period of a security if it is reasonably believed 
that a request was made by exploited seniors or other vulnerable 
adults.
  In many cases, this work is done by financial firms using technology. 
That technology is widely available across financial platforms, and 
this is enabling that technology to flag a question and give pause to 
the movement of funds, thereby protecting a senior's accounts.
  Codifying this Securities and Exchange Commission no-action letter 
will provide our potentially at-risk investors with the protection they 
need to make sure they can receive the hard-earned savings that they 
have built up over the years.
  This is an important bill. It takes the existing practice from the 
Securities and Exchange Commission and makes it law, giving it a 
stronger force of protection for our seniors.
  It is a bipartisan bill. I am very proud that this is the first bill 
reported out of the House Financial Services Committee and that it has 
bipartisan support.
  Mr. Speaker, I urge the adoption and support of this bill. I reserve 
the balance of my time.
  Ms. WATERS. Mr. Speaker, I yield myself such time as I may consume.
  I rise in support of H.R. 500, the Financial Exploitation Prevention 
Act of 2023, sponsored by the gentlewoman from Missouri (Mrs. Wagner).
  Adults over the age of 65 are too often the target of financial 
exploitation and have become victims of financial crimes more than any 
other demographic.
  In the annual report on elder fraud and abuse, the Department of 
Justice reported that, in 2020 alone, seniors suffered over $1 billion 
in financial losses due to fraud.
  Unlike other adults, seniors are often dependent on their savings to 
support them in retirement, making it much more difficult for them to 
recover from incidents of fraud.
  Brokers and investment managers, who often stand in as the stewards 
of the savings of seniors, are in a unique position to protect elders 
from financial crimes.
  In 2018, the Securities and Exchange Commission released a letter 
called a no-action letter stating that the Commission would not take 
enforcement action against the agents of an investment company, 
including mutual funds, if the person paused a payment or redemption 
based on the suspicion of financial exploitation.
  This pause on cashing out the savings of a senior provides a 
necessary safeguard to ensure that the redemption is consistent with 
the will of the senior.
  H.R. 500 would codify this SEC letter. It would also make two further 
changes to describe how a mutual fund adviser can establish the process 
at each fund to protect seniors.
  I thank Mrs. Wagner for working with my staff to craft the language 
in this bill. This is a helpful piece of legislation that will provide 
one more tool to market participants to protect investors and, in 
particular, our Nation's retirees.
  Mr. Speaker, this legislation passed with bipartisan support last 
Congress, and I urge my colleagues to once again

[[Page H500]]

support this bill. I reserve the balance of my time.
  Mr. McHENRY. Mr. Speaker, I yield such time as she may consume to the 
gentlewoman from Missouri (Mrs. Wagner), the chair of the Subcommittee 
on Capital Markets.
  Mrs. WAGNER. Mr. Speaker, I rise in support of my bill, H.R. 500, the 
Financial Exploitation Prevention Act.
  It is, indeed, a bipartisan bill that will help prevent seniors and 
other vulnerable adults from becoming victims of fraud.
  I thank Chairman McHenry for his very strong support on this 
important legislation and the ranking member for working with us on 
this legislation.
  Financial exploitation of seniors and other vulnerable adults is a 
serious and growing problem. Over the next 10-plus years, 10,000 
Americans will turn 65 every day, with seniors making up 18 percent of 
the Nation's population by 2030.
  As more investors age into retirement, their risk of exploitation 
increases. Sadly, about one in five senior investors falls prey to 
financial fraud, and those investors lose an estimated $2.9 billion 
annually in reported cases.

                              {time}  1700

  However, according to the National Adult Protective Services 
Association, only 1 in 44 cases of financial abuse is ever even 
reported.
  Right now, approximately 44 percent of households headed by a baby 
boomer and 30 percent of Silent Generation households own mutual funds. 
My bill proposes a solution to fight elder abuse in the context of 
mutual funds.
  Since some mutual fund shareholder accounts are held directly with 
the mutual fund and serviced by the fund's transfer agent, or direct-
at-fund accounts, as they are known, the transfer agent is typically 
responsible for opening and servicing the accounts, maintaining the 
account records, and serving as the fund's point of contact for those 
shareholders.
  Under current law, when a fund's transfer agent suspects financial 
exploitation in a direct-at-fund account, it cannot lawfully delay the 
disbursement of redemption proceeds while an investigation occurs.
  My legislation would codify both a FINRA and SEC issued no-action 
letter from 2018 that permits a mutual fund and its transfer agent to 
delay the redemption period of a security if they reasonably believe 
that a request was made by exploiting seniors or other vulnerable 
adults. It does not stop this trade from going through, it just takes a 
pause while they check with that senior to make sure that there has not 
been fraud or elder abuse anticipated.
  This will provide our potentially vulnerable investors with an 
important layer of investor protection to help make sure that they 
receive the hard-earned savings that they have built up over the years.
  Additionally, and importantly, my bill also requires the SEC to 
report to Congress on additional potential legislative solutions for 
further combating financial exploitation of seniors and vulnerable 
adults.
  Many of us have had the bittersweet experience of caring for a parent 
or loved one as they grow older. This legislation will give our 
constituents the peace of knowing that their loved ones are better 
protected from fraud.
  Mr. Speaker, I strongly urge my colleagues to support the Financial 
Exploitation Prevention Act.
  Ms. WATERS. Mr. Speaker, I reserve the balance of my time.
  Mr. McHENRY. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman 
from New York (Mr. Lawler), the newest member of the House Financial 
Services Committee.
  Mr. LAWLER. Mr. Speaker, today, I rise to speak in support of H.R. 
500, the Financial Exploitation Prevention Act of 2023. I thank my 
colleague, the gentlewoman from Missouri, for introducing this 
legislation.
  Too often, our offices receive desperate calls from seniors who have 
been exploited by scammers who coerced them into making bad or risky 
investments and cost them all or most of their life savings. These 
calls are especially heartbreaking as our seniors are the ones who have 
sacrificed so much to build our country into the incredible Nation that 
it is today.
  That is why the Financial Exploitation Prevention Act codifies a 
process by which seniors and vulnerable adults in our country are given 
a tool they can use to fight back: time.
  By delaying the transfer of funds and verifying that the true will of 
the accountholder is being exercised, we can, hopefully, prevent more 
of these tragic calls and circumstances from happening in the first 
place--as my colleague pointed out, $2.9 billion a year in fraud 
perpetrated upon our seniors.
  Mr. Speaker, I urge the Senate to join us in passing this commonsense 
legislation into law to protect our seniors and our most vulnerable 
residents across our country.
  Ms. WATERS. Mr. Speaker, I yield myself the balance of my time.
  H.R. 500 is a helpful piece of legislation that will support our 
Nation's seniors as they seek to fund their retirement.
  Investment advisers and brokers want to do the right thing to stop 
fraud when they see it, and this bill will ensure they are able to do 
so.
  The bill is supported by the Consumer Federation of America, the 
North American Securities Administrators Association, and Public 
Citizen.
  Mr. Speaker, I urge all Members to support this bill, and I yield 
back the balance of my time.
  Mr. McHENRY. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I said to the ranking member that I was prepared to 
close. We have a Member that just arrived, and I am going to allow her 
to have a closing statement here.
  I thank the ranking member, Mr. Speaker, and her staff working with 
the Republican staff of the House Financial Services Committee for 
being able to move these first pieces of legislation. We have three 
bills that are on the suspension calendar this evening that are 
bipartisan bills. One has a primary sponsor by a Democrat, and two have 
primary sponsors by Republicans, but all are bipartisan. I thank the 
ranking member for her willingness to work across the aisle to move 
bipartisan legislation.
  In doing this, I recall the beginning of last Congress 2 years ago, 
and 2 years before that, when she reached out to Republicans in the 
then-minority and offered us the same thing. I am grateful for that 
outreach 2 and 4 years ago.
  I have extended the same hand to the gentlewoman from California, and 
she has likewise extended the same hand to me. Mr. Speaker, I am very 
grateful for the leadership of the ranking member and her willingness 
to work with us.
  Mr. Speaker, I yield the balance of my time to the gentlewoman from 
Indiana (Mrs. Houchin), a new member of the House Financial Services 
Committee.
  Mrs. HOUCHIN. Mr. Speaker, I rise today in support of the Financial 
Exploitation Prevention Act, a bill that I am proud to be a cosponsor 
of.
  Every day, seniors and other vulnerable adults become targets of 
financial fraud. While not all the cases are known or discovered, about 
one in five senior investors in the United States are victims of 
financial scams. In 2021 alone, there were over 1,500 reported cases of 
financial fraud against Hoosier seniors. This is unacceptable.
  As a member of the House Financial Services Committee, this is 
exactly the type of legislation my constituents sent me here to 
support. That is why, today, I will be voting ``yes'' on this important 
bill to keep our seniors' pocketbooks safe.
  Mr. Speaker, I hope all of my colleagues will join me in doing the 
same.
  Mr. McHENRY. Mr. Speaker, I urge the adoption of this bill, and I 
yield back the balance of my time.
  Ms. JACKSON LEE. Mr. Speaker, I rise in support of H.R. 500--the 
Financial Exploitation Prevention Act of 2023, to amend the Investment 
Company Act of 1940 to postpone the date of payment or satisfaction 
upon redemption of certain securities in the case of the financial 
exploitation of specified adults.
  H.R. 500 would allow a registered open-end investment company to 
better protect seniors by delaying the redemption period of any 
redeemable security if it was reasonably believed that such redemption 
was requested through the financial exploitation of a security holder 
who is a senior or individual unable to protect their own interests.
  The legislation would also require the Securities and Exchange 
Commission to submit a report to Congress that includes recommendations 
for regulatory and legislative changes that would address financial 
exploitation of older adults.

[[Page H501]]

  16.9 percent of the United States population are adults 65 years and 
older. The nations' population is aging, and it is predicted that one 
in five Americans will be 65 years or older by 2040.
  As our population gets older, it is imperative that we continue to 
protect ourselves against those who take financial advantage of our 
elders.
  According to the Department of Justice, there were more than 92,000 
victims of elder fraud in 2021. These 92,000 cases accounted for $1.7 
billion in losses in 2021.
  Financial exploitation refers to financial crimes committed against 
older adults. Financial abuse is typically committed by someone that 
the senior knows and trusts, whereas financial fraud is committed by a 
stranger.
  The median income of seniors 65 years and older is $47,620, while the 
average annual expenses for this age group is $48,872.
  With this budget mismatch, many seniors are already on strict 
budgets, and with the risk of financial exploitation, it is essential 
that this age group is protected by legislation that makes it more 
difficult for unscrupulous individuals--whether a family member or a 
stranger--to take their hard-earned money from them.
  In 2021, Texas ranked number three in the number of victims of 
financial exploitation. Almost 6,800 seniors were impacted, and the 
total losses were over $150 million.
  This legislation would help our seniors by requiring that financial 
institutions delay the redemption period for redeemable securities if 
it is believed that the request was made under financial exploitation.
  As the number of elders increases in our Nation, the risk of 
financial exploitation increases. Lawmakers must work together to 
ensure that we are protecting Americans and their investments, and this 
legislation would do just that.
  This common sense, bipartisan legislation passed the House in the 
117th Congress, and shows that the two parties have the ability to come 
together to work on legislation that positively impacts the American 
public.
  I urge my colleagues on both sides of the isle to support H.R. 500--
the Financial Exploitation Prevention Act of 2023.
  As we grow older as a nation, we must work to protect our elders.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from North Carolina (Mr. McHenry) that the House suspend the 
rules and pass the bill, H.R. 500.
  The question was taken.
  The SPEAKER pro tempore. In the opinion of the Chair, two-thirds 
being in the affirmative, the ayes have it.
  Mr. McHenry. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 8 of rule XX, further 
proceedings on this motion will be postponed.

                          ____________________