Elder Financial Abuse by Brokers and Advisers: California Claims and FINRA Arbitration
By Michael J. Reiser | Last reviewed September 29, 2026
Financial exploitation of an older investor can start with something that looks routine: a recommendation that does not fit the investor's needs, trades nobody authorized, or a withdrawal the account owner cannot explain. At the other end it is outright theft. California gives elders and their families a strong statutory claim for financial abuse, and FINRA's rules add safeguards inside the brokerage account. When the wrongdoer is a broker or brokerage firm, the claim is often decided in FINRA arbitration rather than in court.
Who California's elder abuse law protects
California's Elder Abuse and Dependent Adult Civil Protection Act defines an "elder" as "any person residing in this state, 65 years of age or older." Cal. Welf. & Inst. Code § 15610.27. The Act separately protects dependent adults, whom it defines on their own terms.
What counts as elder financial abuse in California
Financial abuse occurs when a person or entity takes, secretes, appropriates, obtains, or retains an elder's real or personal property for a wrongful use or with intent to defraud, or assists someone else in doing so. It also occurs when the property is taken by undue influence. Id. § 15610.30(a). A person takes property for a "wrongful use" if, among other things, the person knew or should have known that the conduct was likely to be harmful to the elder. Id. § 15610.30(b).
Two features give the statute real force in investment cases. Liability extends to anyone who assists in the taking, not only the person who ends up with the money. And because of the "knew or should have known" standard, a claim can be established without proof of an intent to defraud.
Attorney's fees and the four-year deadline
When financial abuse is proven by a preponderance of the evidence, the court "shall award to the plaintiff reasonable attorney's fees and costs," in addition to compensatory damages and other remedies. Id. § 15657.5(a). That fee provision can make a smaller case worth bringing. Enhanced remedies become available if the plaintiff also proves by clear and convincing evidence that the defendant was guilty of recklessness, oppression, fraud, or malice in committing the abuse. Id. § 15657.5(b).
A financial abuse action must be filed within four years after the plaintiff discovers, or through reasonable diligence should have discovered, the facts constituting the abuse. Id. § 15657.7.
FINRA arbitration for claims against brokers
Claims against brokerage firms and their registered representatives are frequently resolved in arbitration administered by FINRA, the self-regulatory organization for broker-dealers. Under FINRA Rule 12200, parties must arbitrate a dispute under FINRA's Customer Code when three conditions are met: arbitration is required by a written agreement or requested by the customer; the dispute is between a customer and a FINRA member firm or a person associated with a member; and the dispute arises in connection with the business activities of the member or associated person.
The first condition does more work than it seems. Because a customer's request is enough, a customer can generally require a FINRA member to arbitrate a covered dispute even without an arbitration agreement.
FINRA also limits how old a claim can be. No claim is eligible for FINRA arbitration where six years have elapsed from the occurrence or event giving rise to the claim. FINRA Rule 12206(a). That rule does not extend any statute of limitations, so a shorter deadline under state law can still bar the claim. FINRA Rule 12206(c).
If the broker sold an investment that turned out to be a Ponzi scheme, our article on Ponzi scheme recovery, receivers and clawbacks covers the receivership side.
Safeguards inside the brokerage account
FINRA requires member firms to make reasonable efforts to obtain the name and contact information of a "trusted contact person," age 18 or older, for each non-institutional account. FINRA Rule 4512(a)(1)(F) & Supplementary Material .06. If you help a parent with finances, ask whether a trusted contact is on file. It gives the firm someone to call if it suspects exploitation.
FINRA Rule 2165 permits, but does not require, a firm to place a temporary hold on a disbursement of funds or securities, or on a securities transaction, in the account of a "specified adult" when the firm reasonably believes financial exploitation has occurred, is occurring, has been attempted, or will be attempted. A specified adult is a person age 65 or older, or a person 18 or older whom the firm reasonably believes has a mental or physical impairment that renders the person unable to protect his or her own interests.
The hold is short. It expires no later than 15 business days after it is placed, unless a regulator or court ends or extends it. The firm may extend it by up to 10 more business days if its internal review supports its belief, and by up to 30 more business days after that if it has also reported its belief to a state regulator, agency, or court. FINRA Rule 2165(a)(1), (b).
Florida's vulnerable adult statute
Florida law gives a "vulnerable adult" who has been abused, neglected, or exploited a cause of action against the perpetrator for actual and punitive damages, and a party who prevails "may be entitled to recover reasonable attorney's fees, costs of the action, and damages." Fla. Stat. § 415.1111.
Unlike California's definition of an elder, Florida's definition turns on impairment rather than age. A vulnerable adult is a person 18 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, among other causes, a mental, emotional, sensory, long-term physical, or developmental disability or dysfunction, brain damage, or the infirmities of aging. Fla. Stat. § 415.102.
Warning signs and first steps for families
Watch for sudden changes in trading activity, new account authorizations or beneficiaries, withdrawals the account owner cannot explain, and a new adviser who discourages the owner from talking with family.
If something looks wrong, preserve the account statements and correspondence. Write down what the account owner remembers about the recommendations while the memory is fresh, and look up the adviser on FINRA BrokerCheck. Deadlines run from the events or from their discovery, so do not wait to act.
Talking with Reiser Law
Reiser Law, P.C. handles investor fraud and fiduciary duty disputes in California, Florida and federal courts and in arbitration. Learn more about our practice areas, contact our Bay Area office or Miami office, or send us a message.
This article is general information, not legal advice, and reading it does not create an attorney-client relationship. The law changes, and its application depends on the facts of each case. Attorney advertising.