Michigan Office of Administrative Hearings and Rules

Administrative Rules Division (ARD)

MOAHR-Rules@michigan.gov

REGULATORY IMPACT STATEMENT

and COST-BENEFIT ANALYSIS (RIS)

AGENCY INFORMATION:

Department name:

Attorney General

Bureau name:

Financial Crimes Division

Name of person filling out RIS:

Donna Bellgowan

Phone number of person filling out RIS:

517-241-1073

Email of person filling out RIS:

bellgowand@michigan.gov

RULE SET INFORMATION:

ARD assigned rule set number:

2024-33 AG

Title of proposed rule set:

Uniform Securities Act (2002)

COMPARISON OF RULE(S) TO FEDERAL/STATE/ASSOCIATION STANDARDS

1. Compare the proposed rules to parallel federal rules or standards set by a state or national licensing agency

or accreditation association, if any exist.

The amendments to the Uniform Securities Act (2002), MCL 451.2531 to 451.2543, were enacted on December 13,

2023, and took effect on March 13, 2024. The amendments require a broker-dealer or investment adviser to report

suspected or detected “covered financial exploitation” of its clients or customers to law enforcement or adult protective

services. Covered financial exploitation is defined by MCL 451.2531(e) to mean, “financial exploitation of an individual

through deception, manipulation, coercion, intimidation, or improper leveraging of a caregiver relationship.”

A broker-dealer and an investment adviser are defined elsewhere in the Uniform Securities Act (2002), by MCL

451.2102(d) and MCL 451.2102a(e), respectively.

Law enforcement and adult protective services are required by MCL 451.2535(5) to provide notice to the county

prosecutor within 15 business days of receiving a report of suspected or detected covered financial exploitation from a

broker-dealer or investment adviser. Broker-dealers or investment advisers are permitted by MCL 451.2535(6) to

provide notice to the county prosecutor if they are unable to communicate with adult protective services or law

enforcement. Broker-dealers or investment advisers are also permitted by MCL 451.2535(6) to provide notice to the

county prosecutor if adult protective services or law enforcement does not provide the required follow-up notifications

to the broker-dealer or investment adviser which are required by MCL 451.2535(4).

The proposed rules prescribe the manner which notification must be made to the county prosecutor’s office by law

enforcement, adult protective services, broker-dealers, and investment adviser under the Act. Due to the limited

purpose of the rules, no parallel federal rules or standards set by a state or national licensing agency or accreditation

association exist. Broker-dealers and investment advisers are required to report suspicious activity to the Financial

Crimes Enforcement Network, under the Bank Secrecy Act of 1970, 31 USC 5311-5332, but as there is no similar

statutory requirement to notify a prosecuting authority, there are no parallel rules or standards associated with that

requirement.

A. Are these rules required by state law or federal mandate?

MCL 24.245(3)

RIS-Page 2

MCL 451.2535(5) & (6) provide that notice must be made in a manner prescribed by the attorney general.

B. If these rules exceed a federal standard, please identify the federal standard or citation, describe why it

is necessary that the proposed rules exceed the federal standard or law, and specify the costs and

benefits arising out of the deviation.

No parallel federal standards exist.

2. Compare the proposed rules to standards in similarly situated states, based on geographic location,

topography, natural resources, commonalities, or economic similarities.

The amendments to the Uniform Securities Act (2002), MCL 451.2531 to 451.2543, were enacted on December 13,

2023, and took effect on March 13, 2024. The amendments require a broker-dealer or investment adviser to report

suspected or detected “covered financial exploitation” of its clients or customers to law enforcement or adult protective

services. Covered financial exploitation is defined by MCL 451.2531(e) to mean, “financial exploitation of an individual

through deception, manipulation, coercion, intimidation, or improper leveraging of a caregiver relationship.”

A broker-dealer and an investment adviser are defined elsewhere in the Uniform Securities Act (2002), by MCL

451.2102(d) and MCL 451.2102a(e), respectively.

Law enforcement and adult protective services are required by MCL 451.2535(5) to provide notice to the county

prosecutor within 15 business days of receiving a report of suspected or detected covered financial exploitation from a

broker-dealer or investment adviser. Broker-dealers and investment advisers are permitted by MCL 451.2535(6) to

provide notice to the county prosecutor if they are unable to communicate with adult protective services or law

enforcement. Broker-dealers and investment advisers are also permitted by MCL 451.2535(6) to provide notice to the

county prosecutor if adult protective services or law enforcement does not provide the required follow-up notifications

to the broker-dealer or investment adviser which are required by MCL 451.2535(4).

The proposed rules prescribe the manner which notification must be made to the county prosecutor’s office by law

enforcement, adult protective services, and broker-dealer or investment adviser under the Act. Due to the limited

purpose of the rules, there are no similar standards in other similarly situated states.

A. If the rules exceed standards in those states, please explain why and specify the costs and benefits

arising out of the deviation.

There are no similar standards in other similarly situated states.

3. Identify any laws, rules, and other legal requirements that may duplicate, overlap, or conflict with the

proposed rules.

Broker-dealers and investment advisers are required to report suspicious activity to the Financial Crimes Enforcement

Network, under the Bank Secrecy Act of 1970, 31 USC 5311-5332, but broker-dealers and investment advisers are

not required under this law to notify a prosecuting authority of the suspicious activity. The proposed rules prescribe

the manner which notification must be made to the county prosecutor’s office of suspected or detected covered

financial exploitation by law enforcement, adult protective services, and by broker-dealers and investment advisers

under the amendments to the Uniform Securities Act (2002). There is no overlap or duplicate between the

requirements of the Bank Secrecy Act of 1970, 31 USC 5311-5332, and the proposed rules.

MCL 400.11a(4) permits any person who suspects that an adult has been abused, neglected, or exploited to make a

report to the county department of social services of the county in which the abuse, neglect, or exploitation occurred.

However, this provision also does not permit broker-dealers and investment advisers to notify the county prosecutor’s

office of financial exploitation, nor does it require adult protective services or law enforcement to notify the county

prosecutor’s office of financial exploitation. Therefore, there is no overlap or duplication between the requirements of

MCL 400.11a(4) and the proposed rules.

There are no laws, rules, or other legal requirements that may conflict with the proposed rules.

A. Explain how the rules have been coordinated, to the extent practicable, with other federal, state, and

local laws applicable to the same activity or subject matter. This section should include a discussion of

the efforts undertaken by the agency to avoid or minimize duplication.

The proposed rules have been coordinated, to the extent practicable, with the reporting requirements of the

Bank Secrecy Act of 1970, 31 USC 5311-5332. Efforts were undertaken to minimize duplication related to

reporting requirements.

PURPOSE AND OBJECTIVES OF THE RULE(S)

MCL 24.245(3)

RIS-Page 3

4. Identify the behavior and frequency of behavior that the proposed rules are designed to alter.

The amendments to the Uniform Securities Act (2002), MCL 451.2531 to 451.2543, were enacted on December 13,

2023, and took effect on March 13, 2024. The amendments require a broker-dealer or investment adviser to report

suspected or detected “covered financial exploitation” of its clients or customers to law enforcement or adult protective

services. Covered financial exploitation is defined by MCL 451.2531(e) to mean, “financial exploitation of an individual

through deception, manipulation, coercion, intimidation, or improper leveraging of a caregiver relationship.”

A broker-dealer and an investment adviser are defined elsewhere in the Uniform Securities Act, by MCL 451.2102(d)

and MCL 451.2102a(e), respectively.

Law enforcement and adult protective services are required by MCL 451.2535(5) to provide notice to the county

prosecutor within 15 business days of receiving a report of suspected or detected covered financial exploitation from a

broker-dealer or investment adviser. Broker-dealers and investment advisers are permitted by MCL 451.2535(6) to

provide notice to the county prosecutor if they are unable to communicate with adult protective services or law

enforcement. Broker-dealers and investment advisers are also permitted by MCL 451.2535(6) to provide notice to the

county prosecutor if adult protective services or law enforcement does not provide the required follow-up notifications

to the broker-dealer or investment adviser which are required by MCL 451.2535(4).

The behavior that the rules are intended to affect is the manner of notification to the county prosecutor’s office under

the amendments to the Uniform Securities Act (2002). The rules prescribe a method for adult protective services, law

enforcement, and broker-dealers and investment advisers to send notice to a county prosecutor’s office when notice

is required or permitted to be made to the county prosecutor’s office under the Act. The rules also permit, but do not

require, broker-dealers and investment advisers to send a copy of any notice sent to the county prosecutor’s office to

the department of attorney general.

A. Estimate the change in the frequency of the targeted behavior expected from the proposed rules.

There is no expected change in the frequency of the targeted behavior. The rules prescribe a method for adult

protective services, law enforcement, broker-dealers, and investment advisers to send notice to a county

prosecutor’s office when notice is required or permitted to be made to the county prosecutor’s office under the

amendments to the Uniform Securities Act (2002). The rules also permit, but do not require, broker-dealers and

investment advisers to send a copy of any notice sent to the county prosecutor’s office to the department of

attorney general.

B. Describe the difference between current behavior/practice and desired behavior/practice.

The difference between the current behavior/practice and desired behavior/practice is that prior to enactment of

the amendments to the Uniform Securities Act (2002) there was no process in place for making notifications to

the county prosecutor’s office of covered financial exploitation. Pursuant to the amendments to the Uniform

Securities Act (2002) that took effect on March 13, 2024, notifications will be made to the county prosecutor’s

office under the Act in a manner prescribed by the attorney general. The proposed rules prescribe a method for

adult protective services, law enforcement, broker-dealers, and investment advisers to send notice to a county

prosecutor’s office when notice is required or permitted to be made to the county prosecutor’s office under the

amendments to the Act. The rules also permit, but do not require, broker-dealers and investment advisers to

send a copy of any notice sent to the county prosecutor’s office to the department of attorney general.

C. What is the desired outcome?

The desired outcome of promulgating these rules is that a standardized method of providing notification to the

county prosecutor under the amendments to the Uniform Securities Act (2002), MCL 451.2531 to 451.2543, will

be prescribed by the attorney general as required by the text of the Act.

The promulgation of these rules will:

(a) Provide a form with a description of the content that shall be provided by adult protective services or law

enforcement to provide required notice to the county prosecutor.

(b) Provide a form with a description of the content that shall be provided by the broker-dealers and

investment advisers to provide permissive notice to the county prosecutor.

(c)

Provide guidelines for broker-dealers and investment advisers to determine in which county to contact the

county prosecutor.

(d) Provide guidelines for broker-dealers and investment advisers to determine how to obtain contact

information for the county prosecutor.

(e) Avoid confusion when multiple law enforcement agencies receive copies of a single notification of

covered financial exploitation from a broker-dealer or investment adviser by requiring that every law

enforcement agency that receives a copy of the notification of covered financial exploitation from a broker-

dealer or investment adviser contact the county prosecutor’s office.

(f)

Provide a standardized, permissive method for broker-dealers and investment advisers to send a copy of

MCL 24.245(3)

RIS-Page 4

any notice sent to the county prosecutor’s office to the department of attorney general.

5. Identify the harm resulting from the behavior that the proposed rules are designed to alter and the likelihood

that the harm will occur in the absence of the rule.

The amendments to the Uniform Securities Act (2002), MCL 451.2531 to 451.2543, state that notifications made to

the county prosecutor under the Act “must be made in a manner prescribed by the attorney general.”

The rules serve to prescribe the manner which notification must be made to the county prosecutor’s office. If the rules

are not promulgated, the likely harm is that any notifications to the county prosecutor’s office will not be made in

compliance with the requirement that the attorney general must prescribe the manner of notification.

The rules also serve to provide a standardized, permissive method for broker-dealers and investment advisers to

send a copy of any notice sent to the county prosecutor’s office to the department of attorney general. If the rules are

not promulgated the likely harm regarding this requirement is that the department of attorney general may not have

sufficient information to assist broker-dealers and investment advisers if they have difficulty communicating with a

county prosecutor’s office.

A. What is the rationale for changing the rules instead of leaving them as currently written?

As the amendments to the Uniform Securities Act (2002) recently took effect on March 13, 2024, there are

currently no rules.

6. Describe how the proposed rules protect the health, safety, and welfare of Michigan citizens while promoting

a regulatory environment in Michigan that is the least burdensome alternative for those required to comply.

The proposed rules protect the health, safety, and welfare of Michigan citizens by ensuring that covered financial

exploitation reported under the amendments to the Uniform Securities Act (2002) by broker-dealers and investments

advisers is reported in a standardized manner to the county prosecutor’s office. These rules also promote a

regulatory environment in Michigan that is the least burdensome alternative for those required to comply as the rules

require only a single-page form to be completed to provide notice to the county prosecutor’s office; any attachments to

the form would be copies of reports already required to be generated in the ordinary course of business by the

agencies making the notification to the county prosecutor’s office.

7. Describe any rules in the affected rule set that are obsolete or unnecessary and can be rescinded.

As the amendments to the Uniform Securities Act (2002) took effect on March 13, 2024, there are currently no rules.

FISCAL IMPACT ON THE AGENCY

Fiscal impact is an increase or decrease in expenditures from the current level of expenditures, i.e., hiring

additional staff, higher contract costs, programming costs, changes in reimbursements rates, etc. over and

above what is currently expended for that function. It does not include more intangible costs for benefits, such

as opportunity costs, the value of time saved or lost, etc., unless those issues result in a measurable impact on

expenditures.

8. Please provide the fiscal impact on the agency (an estimate of the cost of rule imposition or potential savings

for the agency promulgating the rule).

It is not expected that the promulgation of the rules will have any fiscal impact on the agency promulgating the rules.

The Department of Attorney General is promulgating rules for law enforcement, adult protective services, broker-

dealers, and investment advisers to provide notice of suspected or detected covered financial exploitation to county

prosecutor’s offices. These rules will not require the Department of Attorney General to expend any funds.

9. Describe whether or not an agency appropriation has been made or a funding source provided for any

expenditures associated with the proposed rules.

No agency appropriation has been made, and no funding source has been provided, as it is not anticipated that the

Department of Attorney General will have any expenditures associated with the proposed rules.

10. Describe how the proposed rules are necessary and suitable to accomplish their purpose, in relationship to

the burden(s) the rules place on individuals. Burdens may include fiscal or administrative burdens, or

duplicative acts.

The proposed rules are necessary to prescribe the manner which notification must be made to the county

prosecutor’s office under the amendments to the Uniform Securities Act (2002), MCL 451.2531 to 451.2543. The

MCL 24.245(3)

RIS-Page 5

rules will place very little burden on law enforcement, adult protective services, broker-dealers, and investment

advisers, as the required notice constitutes a one-page form, to which agency reports produced are permitted to be

attached. The rules also place very little burden on the county prosecutor’s office, as county prosecutors already

have responsibility for the prosecution of any criminal activity reported within a designated county.

A. Despite the identified burden(s), identify how the requirements in the rules are still needed and

reasonable compared to the burdens.

Any burden placed on law enforcement, adult protective services, broker-dealers, investment advisers, and

county prosecutor’s offices is necessary to ensure that notification made to the county prosecutor’s office as

permitted or required by the amendments to the Uniform Securities Act (2002) is made in a manner prescribed

by the attorney general, as required by the text of the Act.

IMPACT ON OTHER STATE OR LOCAL GOVERNMENTAL UNITS

11. Estimate any increase or decrease in revenues to other state or local governmental units (i.e., cities,

counties, school districts) as a result of the rule. Estimate the cost increases or reductions for other state or

local governmental units (i.e., cities, counties, school districts) as a result of the rule. Include the cost of

equipment, supplies, labor, and increased administrative costs in both the initial imposition of the rule and

any ongoing monitoring.

There are no anticipated increases or decreases in revenue to state or local governmental units resulting from the

proposed rules. There are also no cost increases or reductions to other state or local governmental units as a result

of the proposed rules.

The requirement for law enforcement and adult protective services to provide notice to the county prosecutor within 15

business days of receiving a report of suspected or detected covered financial exploitation from a broker-dealer or

investment adviser is not expected to affect state or local government revenue or result in additional costs for state or

local government. Similarly, provisions permitting brokers-dealers and investment advisers to provide notice to the

county prosecutor if they are unable to communicate with adult protective services or law enforcement, and to provide

notice to the county prosecutor if adult protective services or law enforcement does not provide the required follow-up

notifications to the broker-dealers and investment advisers, are also not expected to affect state or local government

revenue or result in additional costs for state or local government. The provision permitting broker-dealers and

investment advisers to send a copy of any notice sent to the county prosecutor’s office to the department of attorney

general is also not expected to affect state or local government revenue or result in additional costs for state or local

government.

12. Discuss any program, service, duty, or responsibility imposed upon any city, county, town, village, or school

district by the rules.

The amendments to the Uniform Securities Act (2002) require any law enforcement agency that receives a report of

suspected or detected covered financial exploitation from a broker-dealer or investment adviser to provide notice of

that report to the county prosecutor’s office within 15 business days of receipt of that report. The amendments to the

Act effectively impose a duty on any city, county, town, or village in which a police agency is operating.

The amendments to the Act also require adult protective services to provide notice to the county prosecutor’s office

within 15 business days of receipt of a report of suspected or detected covered financial exploitation from a broker-

dealer or investment adviser. However, adult protective services operates as part of the state department of health

and human services. Therefore, this requirement will not impose a duty on any city, county, town, or village.

The proposed rules prescribe a standardized method of providing notice to county prosecutors’ offices in accordance

with the Act, but do not impose any additional duties upon any city, county, town, village, or school district.

A. Describe any actions that governmental units must take to be in compliance with the rules. This section

should include items such as record keeping and reporting requirements or changing operational

practices.

The amendments to the Uniform Securities Act (2002) require that when adult protective services or a law

enforcement agency receive a report of suspected or detected covered financial exploitation under the

amendments to the Act, that the agency receiving the report must provide notice of that report to the county

prosecutor’s office within 15 business days of receipt of that report. The amendments to the Act require the

governmental units of adult protective services and law enforcement agencies to take action to change their

operational practices to reflect the requirement to provide notification to the county prosecutor’s office.

MCL 24.245(3)

RIS-Page 6

The proposed rules prescribe a standardized method of providing notice to county prosecutors’ offices in

accordance with the Act, but the rules do not impose any additional duties upon governmental units that would

require the units to take action to be in compliance with the rules.

13. Describe whether or not an appropriation to state or local governmental units has been made or a funding

source provided for any additional expenditures associated with the proposed rules.

No appropriations have been made to any governmental unit as a result of these rules. No additional expenditures

are anticipated or intended with the proposed rules.

RURAL IMPACT

14. In general, what impact will the rules have on rural areas?

The proposed rules are not expected to impact rural areas.

A. Describe the types of public or private interests in rural areas that will be affected by the rules.

The proposed rules should have no impact on public or private interests in rural areas.

ENVIRONMENTAL IMPACT

15. Do the proposed rules have any impact on the environment? If yes, please explain.

The proposed rules do not have an environmental impact.

SMALL BUSINESS IMPACT STATEMENT

16. Describe whether and how the agency considered exempting small businesses from the proposed rules.

The agency has not considered exempting small businesses from the proposed rules. The amendments to the

Uniform Securities Act (2002) are expected to increase reporting by broker-dealers and investment advisers to law

enforcement and adult protective services of detected or suspected covered financial exploitation that is perpetrated

against a broker-dealer’s or investment adviser’s clients or customers. The Act requires a broker-dealer or investment

adviser to report covered financial exploitation of its clients or customers to law enforcement or adult protective

services. “Covered financial exploitation,” is defined by MCL 451.2531(e) to mean, “financial exploitation of an

individual through deception, manipulation, coercion, intimidation, or improper leveraging of a caregiver relationship.”

A broker-dealer and an investment adviser are defined elsewhere in the Uniform Securities Act (2002), by MCL

451.2102(d) and MCL 451.2102a(e), respectively.

Law enforcement and adult protective services are required by MCL 451.2535(5) to provide notice to the county

prosecutor within 15 business days of receiving a report of suspected or detected covered financial exploitation from a

broker-dealer or investment adviser. Broker-dealers or investment advisers are permitted by MCL 451.2535(6) to

provide notice to the county prosecutor if they are unable to communicate with adult protective services or law

enforcement. Broker-dealers or investment advisers are also permitted by MCL 451.2535(6) to provide notice to the

county prosecutor if adult protective services or law enforcement does not provide the required follow-up notifications

to the broker-dealer or investment adviser which are required by MCL 451.2535(4).

The proposed rules prescribe standardized methods for county prosecutors to be given notice of reports of covered

financial exploitation under the Act. Even if any broker-dealers or investment advisers are also small businesses,

there is no basis in the Act to exempt a broker-dealer or investment adviser which is also a small business from the

requirement to report covered financial exploitation in a manner prescribed by the attorney general. Further, the

requirement to report covered financial exploitation is not expected to have a significant economic effect on a broker-

dealer or investment adviser.

17. If small businesses are not exempt, describe (a) the manner in which the agency reduced the economic

impact of the proposed rules on small businesses, including a detailed recitation of the efforts of the agency

to comply with the mandate to reduce the disproportionate impact of the rules upon small businesses as

described below (in accordance with MCL 24.240(1)(a-d)), or (b) the reasons such a reduction was not lawful

or feasible.

MCL 24.245(3)

RIS-Page 7

There is no basis in the Act to exempt a broker-dealer or investment adviser which is also a small business from the

requirement to report covered financial exploitation. Therefore, a reduction of the requirements imposed by the

proposed rules was not feasible.

A. Identify and estimate the number of small businesses affected by the proposed rules and the probable

effect on small businesses.

It is unknown how many broker-dealers and investment advisers are also small businesses. Even if there are

broker-dealers and investment advisers which are also small businesses, the requirement to report covered

financial exploitation is not expected to have a significant economic effect on broker-dealers and investment

advisers.

B. Describe how the agency established differing compliance or reporting requirements or timetables for

small businesses under the rules after projecting the required reporting, record-keeping, and other

administrative costs.

The agency did not establish separate compliance or reporting requirements for small businesses. To the

extent practicable, the rules were drafted to be the least burdensome on all affected persons.

C. Describe how the agency consolidated or simplified the compliance and reporting requirements for

small businesses and identify the skills necessary to comply with the reporting requirements.

The agency did not consolidate or simplify compliance or other reporting requirements for small businesses.

D. Describe how the agency established performance standards to replace design or operation standards

required by the proposed rules.

The agency did not establish performance standards to replace design or operation standards required by the

proposed rules.

18. Identify any disproportionate impact the proposed rules may have on small businesses because of their size

or geographic location.

There is no disproportionate impact on small businesses because of their size or geographical location.

19. Identify the nature of any report and the estimated cost of its preparation by small businesses required to

comply with the proposed rules.

Broker-dealers and investment advisers, whether or not they are also small businesses, are permitted to provide

notice to the county prosecutor if they are unable to communicate with adult protective services or law enforcement

and are permitted to provide notice to the county prosecutor if adult protective services or law enforcement does not

provide the required follow-up notifications to the broker-dealer or investment adviser. The time and any

corresponding cost incurred to complete the permissive notification form would be minimal.

20. Analyze the costs of compliance for all small businesses affected by the proposed rules, including costs of

equipment, supplies, labor, and increased administrative costs.

The expected costs of compliance for a broker-dealer or investment adviser, which might also be a small business,

affected by the proposed rules, are minimal. The amendments to the Uniform Securities Act (2002) require that when

adult protective services or a law enforcement agency receive a report of suspected or detected covered financial

exploitation under the Act, that the agency receiving the report must provide notice of that report to the county

prosecutor’s office within 15 business days of receipt of that report. The Act requires the governmental units of adult

protective services and law enforcement agencies to take action to change their operational practices to reflect the

requirement to provide notification to the county prosecutor’s office.

The proposed rules prescribe a standardized method of providing notice to county prosecutors’ offices in accordance

with the Act, but the rules do not impose any additional duties upon governmental units that would require the units to

take action to be in compliance with the rules.

In order to provide permissive notification to the county prosecutor’s office under the Act, broker-dealers and

investment advisers would need to change their operating procedures slightly to make employees aware of the option

to report suspected or detected covered financial exploitation to the county prosecutor’s office under certain

circumstances.

21. Identify the nature and estimated cost of any legal, consulting, or accounting services that small businesses

would incur in complying with the proposed rules.

Any expected costs for legal, consulting, or accounting services that a broker-dealer or investment adviser, which

might also be a small business, would incur in complying with the proposed rules would be minimal.

MCL 24.245(3)

RIS-Page 8

22. Estimate the ability of small businesses to absorb the costs without suffering economic harm and without

adversely affecting competition in the marketplace.

The expected costs of compliance for a broker-dealer or investment adviser, which may also be a small business, are

minimal. The expected costs to a broker-dealer or investment adviser, which might be a small business, are not

significant enough that they will cause economic harm or adversely affect competition in the marketplace as a result of

the proposed rules.

23. Estimate the cost, if any, to the agency of administering or enforcing a rule that exempts or sets lesser

standards for compliance by small businesses.

Broker-dealers or investment advisers, which might be small businesses, are subject to minimal compliance

standards under the proposed rules. Therefore, administering or enforcing rules that exempt or set lesser standards

for compliance by broker-dealers or investment advisers that are also small businesses would have minimal impact on

broker-dealers and investment advisers and would not materially affect agency costs.

24. Identify the impact on the public interest of exempting or setting lesser standards of compliance for small

businesses.

There is a public interest in ensuring that suspected or detected covered financial exploitation is reported to county

prosecutors’ offices in a standardized manner. Exempting small businesses from this requirement is not an option

under the amendments to the Uniform Securities Act (2002). The public interest is also not harmed by requiring

broker-dealers and investment advisers of all sizes to report covered financial exploitation to county prosecutor’s

offices in a standardized, uniform manner.

25. Describe whether and how the agency has involved small businesses in the development of the proposed

rules.

No small businesses were involved in the development of the proposed rules. The agency involved representatives

from the Regulation of Securities Committee of the Business Law Section of Michigan Bar Association, the Financial

Industry Regulatory Authority, and the Securities Industry and Financial Markets Association in the development of

the proposed rules.

A. If small businesses were involved in the development of the rules, please identify the business(es).

No small businesses were involved in the development of the proposed rules. The agency involved

representatives from the Regulation of Securities Committee of the Business Law section of Michigan Bar

Association, the Financial Industry Regulatory Authority, and the Securities Industry and Financial Markets

Association in the development of the proposed rules.

COST-BENEFIT ANALYSIS OF RULES (INDEPENDENT OF STATUTORY IMPACT)

26. Estimate the actual statewide compliance costs of the rule amendments on businesses or groups.

The proposed rules impose minimal requirements on any businesses or groups, so it is expected that costs will be

minimal.

The amendments to the Uniform Securities Act (2002) require that when adult protective services or a law

enforcement agency receive a report of suspected or detected covered financial exploitation under the amendments

to the Act, that the agency receiving the report must provide notice of that report to the county prosecutor’s office

within 15 business days of receipt of that report. The amendments to the Act require the governmental units of adult

protective services and law enforcement agencies to take action to change their operational practices to reflect the

requirement to provide notification to the county prosecutor’s office.

The proposed rules prescribe a standardized method of providing notice to county prosecutors’ offices in accordance

with the amendments to the Act, but the rules do not impose any additional duties upon governmental units.

In order to provide permissive notification to the county prosecutor’s office under the Act, businesses that are broker-

dealers and investment advisers would need to change their operating procedures slightly to make employees aware

of the option to report covered financial exploitation to the county prosecutor’s office under certain circumstances. To

provide required notification to the county prosecutor’s office under the Act, groups that are law enforcement and adult

protective services would need to change their operating procedures slightly to make employees aware of the

requirement to provide notice of that report to the county prosecutor’s office within 15 business days of receipt of that

report.

A. Identify the businesses or groups who will be directly affected by, bear the cost of, or directly benefit

from the proposed rules.

MCL 24.245(3)

RIS-Page 9

The expected costs of the proposed rules will be minimal, but the businesses and groups that would bear the

costs of the proposed rules are broker-dealers, investment advisers, law enforcement, and adult protective

services.

The additional groups that would be directly affected by the rules would be adults vulnerable to financial

exploitation and adults who would seek to financially exploit others. The group that would directly benefit from

the proposed rules would be adults vulnerable to financial exploitation, as the rules provide a standardized

method for providing notice to county prosecutors’ offices of reports of suspected or detected covered financial

exploitation made by broker-dealers and investment advisers under the amendments to the Uniform Securities

Act (2002). Adults who would seek to financially exploit others would be negatively affected by the rules. The

rules provide a standardized method for providing notice of reports of suspected or detected covered financial

exploitation made by broker-dealers and investment advisers under the amendments to the Uniform Securities

Act (2002) to a county prosecutor’s office, which increases the likelihood that exploitation will be quickly

identified and stopped.

B. What additional costs will be imposed on businesses and other groups as a result of these proposed

rules (i.e., new equipment, supplies, labor, accounting, or recordkeeping)? Please identify the types and

number of businesses and groups. Be sure to quantify how each entity will be affected.

The businesses affected by the rules would be broker-dealers and investment advisers. The exact costs are

not known, but any additional costs imposed on broker-dealers and investment advisers by the rules would be

minimal, and attributable to the cost associated with revising internal operating procedures to ensure employees

were aware of the option to report suspected or detected covered financial exploitation to the county

prosecutor’s office under certain circumstances.

The groups affected by the rules would be law enforcement, adult protective services, adults vulnerable to

financial exploitation, and adults who would seek to financially exploit others would be negatively affected by the

rules. The rules provide a standard method for providing notice of reports of suspected or detected covered

financial exploitation made by broker-dealers and investment advisers under the amendments to the Uniform

Securities Act (2002) to a county prosecutor’s office, which increases the likelihood that exploitation will be

quickly identified and stopped. The exact costs imposed on law enforcement and adult protective services are

not known, but any additional costs imposed on law enforcement and adult protective services by the rules

would be minimal. There would be no additional costs imposed on adults vulnerable to financial exploitation or

adults who seek to financially exploit others.

27. Estimate the actual statewide compliance costs of the proposed rules on individuals (regulated individuals or

the public). Include the costs of education, training, application fees, examination fees, license fees, new

equipment, supplies, labor, accounting, or recordkeeping.

The proposed rules are not expected to impose compliance costs on individuals or on the public.

A. How many and what category of individuals will be affected by the rules?

The individuals expected to be affected by these rules are adults vulnerable to financial exploitation, and adults

who seek to financially exploit others.

No other individuals are expected to be affected by the rules, other than while individuals are acting in their

roles as employees of a business or of a group.

B. What qualitative and quantitative impact do the proposed changes in rules have on these individuals?

Adults vulnerable to financial exploitation would benefit from the rules, as the rules provide a standardized

method for providing notice of reports of suspected or detected covered financial exploitation made by broker-

dealers and investment advisers under the amendments to the Uniform Securities Act (2002) to county

prosecutors’ offices. Adults who would seek to financially exploit others would be negatively affected by the

rules. The rules provide a standard method for providing notice of reports of suspected or detected covered

financial exploitation made by broker-dealers and investment advisers under the amendments to the Uniform

Securities Act (2002 to a county prosecutor’s office, which increases the likelihood that exploitation will be

quickly identified and stopped.

28. Quantify any cost reductions to businesses, individuals, groups of individuals, or governmental units as a

result of the proposed rules.

There are no cost reductions for businesses, individuals, groups of individuals, or governmental units as a result of the

proposed rules.

MCL 24.245(3)

RIS-Page 10

29. Estimate the primary and direct benefits and any secondary or indirect benefits of the proposed rules. Please

provide both quantitative and qualitative information, as well as any assumptions.

The primary and direct benefit of the proposed rules is the prescription of a standardized method of providing notice to

county prosecutors’ offices of reports of suspected or detected covered financial exploitation made by broker-dealers

and investment advisers under the amendments to the Uniform Securities Act (2002). This is a benefit to both law

enforcement and adult protective services, who are required to provide notice to the county prosecutor’s office under

the Act, and to broker-dealers and investment advisers who are permitted to provide notice to the county prosecutor’s

office under the amendments to the Act. This also is a benefit to adults vulnerable to financial exploitation, as the

standardization increases the likelihood that exploitation will be quickly identified and stopped. The secondary impact

is to create a regulatory environment that is the least burdensome for those required to comply.

30. Explain how the proposed rules will impact business growth and job creation (or elimination) in Michigan.

It is not expected that the proposed rules will impact business growth or job creation or elimination in Michigan.

31. Identify any individuals or businesses who will be disproportionately affected by the rules as a result of their

industrial sector, segment of the public, business size, or geographic location.

Adults vulnerable to financial exploitation and adults who seek to financially exploit others will be disproportionately

affected by the rules. The rules provide a standard method for providing notice of reports of suspected or detected

covered financial exploitation made by broker-dealers and investment advisers under the amendments to the Uniform

Securities Act (2002) to a county prosecutor’s office, which increases the likelihood that exploitation will be quickly

identified and stopped.

No other individuals or businesses will be disproportionately affected by the rules as a result of their industrial sector,

segment of the public, business size, or geographic location.

32. Identify the sources the agency relied upon in compiling the regulatory impact statement, including the

methodology utilized in determining the existence and extent of the impact of the proposed rules and a cost-

benefit analysis of the proposed rules.

The agency relied upon its criminal prosecution experience and discussions with members of the Securities

Mandatory Reporting Subcommittee of the Michigan Elder Abuse Task Force to determine the impact of the proposed

rules. Members of the Securities Mandatory Reporting Subcommittee include representatives and members from

Adult Protective Services (DHHS), Michigan Association of Chiefs of Police, Regulation of Securities Committee of the

Business Law Section of Michigan Bar Association, the Financial Industry Regulatory Authority, the Securities

Industry and Financial Markets Association, Michigan Sheriff’s Association, Michigan State Police, and the

Prosecuting Attorneys Association of Michigan.

A. How were estimates made, and what assumptions were made? Include internal and external sources,

published reports, information provided by associations or organizations, etc., that demonstrate a need

for the proposed rules.

The agency relied upon its agency staff and discussions with members of the Securities Mandatory Reporting

Subcommittee of the Michigan Elder Abuse Task Force to formulate estimates and assumptions and determine

the needs for the proposed rules.

ALTERNATIVE TO REGULATION

33. Identify any reasonable alternatives to the proposed rules that would achieve the same or similar goals.

The amendments to the Uniform Securities Act (2002), specifically MCL 451.2535(5)-(6), requires notice to be made

to the county prosecutor’s office in a manner prescribed by the attorney general. The proposed rules prescribe the

manner of notification to the county prosecutor’s office. There are no reasonable alternatives to the proposed rules.

A. Please include any statutory amendments that may be necessary to achieve such alternatives.

There are no reasonable alternatives to the proposed rules.

34. Discuss the feasibility of establishing a regulatory program similar to that proposed in the rules that would

operate through private market-based mechanisms. Please include a discussion of private market-based

systems utilized by other states.

The rules provide a standardized method for law enforcement and adult protective services to make notifications

required by the amendments to the Uniform Securities Act (2002) to the county prosecutor’s office, and for broker-

dealers and investment advisers to make permissive notifications to the county prosecutor’s office under the Act. It is

MCL 24.245(3)

RIS-Page 11

not feasible for a regulatory program similar to that proposed in the rules to be established through a private market-

based mechanism. There are no known private market-based systems operated by other states.

35. Discuss all significant alternatives the agency considered during rule development and why they were not

incorporated into the rules. This section should include ideas considered both during internal discussions

and discussions with stakeholders, affected parties, or advisory groups.

The rules serve a very limited purpose of prescribing a standardized method for law enforcement and adult protective

services to make notifications required by the amendments to the Uniform Securities Act (2002) to the county

prosecutor’s office, and for broker-dealers and investment advisers to make permissive notifications to the county

prosecutor’s office under the amendments to the Act. The attorney general is required under the amendments to the

Act to prescribe the method for those notifications to the county prosecutor’s office. Therefore, no significant

alternatives were considered during the development of the proposed rules.

ADDITIONAL INFORMATION

36. As required by MCL 24.245b(1)(c), please describe any instructions regarding the method of complying with

the rules, if applicable.

The rules explicitly inform persons of the requirements for the method of notification to the county prosecutor’s office

when notification of a report of covered financial exploitation is made under the Act.

MCL 24.245(3)