A National Securities Arbitration & Investment Fraud Law Firm


Published on:

FINRA’s Recent Rules Aim to Further Protect Elderly Investors

In February 2017, after approval by the SEC, the Financial Industry Regulatory Authority (FINRA) put into effective two initiatives: a new rule and an amendment to an old one.

Rule 2165 (Financial Exploitation of Specified Adults) allows member financial professionals or firms to place temporary holds on securities or the disbursements of funds for customers who are believed to be victims of financial exploitation.

Amendments to Rule 4512 (Customer Account Information) now require members to make efforts to get the name and contact information for a trusted contact person pertaining to a customer’s account.

What this means for investors

Essentially, these regulations by FINRA are meant as safeguards for older investors. Elder financial fraud is a big problem within the securities industry, and FINRA is continually looking for ways to protect this vulnerable demographic.

How the temporary holds work

FINRA Rule 2165 does not apply in all situations, such as securities transactions. If, for example, a customer orders the sale of shares, the rule can’t be utilized. But, if there was a reasonable belief that the customer was being exploited, the rule could apply to the disbursement of the proceeds from that sale. However, FINRA recommends not placing a hold over the entire account if the disbursement is less than all assets.

In addition, even if exploitation is suspected and a hold is put on an account, it is still possible for legal disbursements to be made, which is important for things like paying bills. A member can also put a hold on an account if a disbursement request is made from one account to another, such as a friend seeking funds from another friend’s account.

Who are trusted contacts?

Trusted contacts are important for elderly investors. They are meant to protect assets and respond to possible exploitation. Rule 4512 only mandates that a trusted contact be someone 18 or older. The rule doesn’t prohibit trustees, joint accountholders, or authorized individuals with power of attorney.

Under FINRA Rule 4512, a member of a financial firm has the authority to get in touch with a trusted contact and offer information about a customer’s account in order to “address possible financial exploitation, to confirm the specifics of the customer’s current contact information, health status, or the identity of any legal guardian, executor, trustee or holder of a power of attorney, or as otherwise permitted by Rule 2165.”

Health is an especially important topic for older investors. If a FINRA member believes that an ailment is affecting the faculties of a client – such as Alzheimer’s disease or another form of dementia – he or she could talk to a client’s trusted contact to learn about their condition.

And although a member is “required to make reasonable efforts to obtain the trusted contact name and contact information,” the customer doesn’t have to provide it. Just asking for it constitutes a reasonable effort to obtain the necessary information.

Like FINRA, the Silver Law Group is dedicated to helping elderly investors. If you believe you are a victim of financial fraud, contact us. We have successfully recovered money for many investors, and we may be able to do the same for you. Get in touch by phone at 800-975-4345 or reach us through our online contact form.

Posted in:
Published on:

Comments are closed.

Contact Information