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FINRA Floats Plan to Help Block Elder Exploitation

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The Financial Industry Regulatory Authority’s Board on Thursday authorized FINRA to issue for public comment a new rule that would allow firms to place a temporary hold on disbursement of funds or securities from an elderly or mentally/physically handicapped customer’s account if there is a reasonable belief that the person is being financially exploited.

Richard Ketchum, FINRA’s chairman and CEO, said in a Thursday statement that “seniors are at risk, and FINRA is committed to helping protect seniors and other vulnerable adults from financial exploitation. This proposal is an important step forward that would benefit both investors and firms.”  

The proposal would also require member firms to “make reasonable efforts” to obtain the name of and contact information for a trusted contact person for a customer’s account by amending Rule 4512 (Customer Account Information).

The temporary hold plan creates new FINRA Rule 2160 (Financial Exploitation of Eligible Adults), and applies to investors aged 65 or older as well as investors 18 and older who have a mental or physical impairment that renders them unable to protect their own interests.

FINRA says it plans to issue a Regulatory Notice soliciting comment on the proposal within the next several weeks.

The self-regulator launched in late April a toll-free helpline for seniors to provide them with assistance regarding their brokerage accounts and investments.

To date, FINRA says it has received more than 1,500 calls on issues including how to find information on their brokers, calls from children of deceased parents trying to locate assets or having difficulty moving assets from a brokerage firm, concerns from seniors ranging from routine poor service complaints to routine sales practice issues at firms, and fraud raised by a senior and/or child on behalf of senior investors.

The hotline comes on the heels of an examination of 44 broker-dealers recently released by the Securities and Exchange Commission and FINRA finding that some BDs are recommending unsuitable products to seniors.