Compliance

FINRA Aims For Closer Policing of Elder Financial Abuse

The Securities and Exchange Commission has approved FINRA's rule proposal addressing financial exploitation of seniors. 

By John Manganaro editors@assetinternational.com | March 30, 2017

The Financial Industry Regulatory Authority (FINRA) has issued Regulatory Notice 17-11, assigning a February 5, 2018, effective date for the rule proposal aimed at curbing financial abuse of older Americans.

According to FINRA and the Securities and Exchange Commission, which approved the regulatory action, there will be two key updates to FINRA policies. First, advisory firms will be “required to make reasonable efforts to obtain the name and contact information for a trusted contact person for a customer's account.” Second, firms will be “permitted to place a temporary hold on a disbursement of funds or securities when there is reasonable belief of financial exploitation.”

Robert Cook, FINRA president and CEO, says the rulemaking will provide firms with tools to respond more quickly and effectively to protect seniors from financial exploitation. “This project included input and support from both investor groups and industry representatives and it demonstrates a shared commitment to an important, common goal,” he explains.

As the regulation lays out, the “trusted contact person” is intended to be “a resource for firms in handling customer accounts, protecting assets and responding to possible financial exploitation of any vulnerable investors.”

The “temporary holds” provided for in the regulation “will allow firms to investigate the matter and reach out to the customer, the trusted contact and, when appropriate, law enforcement or adult protective services, before disbursing funds when there is a reasonable belief of financial exploitation.

“It is a critical measure because of the difficulty investors face in trying to recover funds that they have inadvertently sent to fraudsters and scam artists,” Cook adds.

Prior to the implementation date, FINRA will amend its New Account Application Template, a voluntary model brokerage account form that is provided as a resource to firms when they design or update their new account forms, to capture trusted contact person information.