The Financial Industry Regulatory Authority is seeking feedback on whether its rules protecting senior investors need an overhaul.
FINRA states in Regulatory Notice 19-27, issued Friday, that it’s conducting a retrospective review to assess the effectiveness and efficiency of its rules and administrative processes that help protect senior investors from financial exploitation.
FINRA wants to know if additional tools, guidance or changes to the following FINRA rules or administrative processes are appropriate to further address suspected financial exploitation and other circumstances of financial vulnerability for senior investors.
The broker-dealer self-regulator is seeking feedback by Oct. 8 on the following rules:
- Rule 2165, which permits a broker-dealer to place a temporary hold on a disbursement of funds or securities from the account of a “specified adult” customer when the firm reasonably believes that financial exploitation of that adult has occurred, is occurring, has been attempted or will be attempted.
- Rule 3240 (Borrowing From or Lending to Customers) Lending arrangements between registered persons and customers is an area of interest for FINRA because of the potential for misconduct.
- Rule 4512, which requires broker-dealers to make reasonable efforts to obtain the name of and contact information for a trusted contact person upon the opening of a customer’s account or when updating account information.
As to Rule 2165, FINRA also wants to know if Rule 2165’s safe harbor should be extended to apply to transactions in securities, in addition to disbursements of funds and securities.
Among other questions, FINRA is probing BDs on the methods firms have used in seeking to obtain trusted contact person information.
Also, FINRA wants feedback on whether it should amend the Sanctions Guidelines to add as a principal consideration the fact that a victimized customer is a “specified adult” (i.e., a person 65 or older or a person 18 or older who the member reasonably believes has a mental or physical impairment that renders the individual unable to protect his or her own interests).
After assessing BDs’ feedback, FINRA will consider appropriate next steps, which may include modifying the rules, updating or issuing additional guidance.
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