FINRA Mulls Further Changes to Senior Exploitation Rule
FINRA wants to extend the period for placing a temporary hold on accounts and create the first uniform, national standard for placing holds on transactions.
The Financial Industry Regulatory Authority wants to further amend Rule 2165 (Financial Exploitation of Specified Adults) to extend the hold period and allow temporary holds on securities transactions in cases of suspected financial exploitation of seniors.
Related: FINRA Advances Rules on Senior Exploitation, E-Signatures
Regulatory Notice 20-34 requests comments by Dec. 4 on FINRA’s plan to extend the period for placing a temporary hold on accounts to 55 days from 25 and to create the first uniform, national standard for placing holds on transactions related to suspected financial exploitation.
As it stands now, Rule 2165 allows broker-dealers to place a temporary hold on a specified adult customer’s account for up to 25 business days if the criteria in the rule are satisfied.
The rule also provides that the 25-day period may be terminated or extended by a state agency or a court of competent jurisdiction, FINRA states.
Previous feedback FINRA received supported extending the hold period.
During FINRA exams in 2019 focusing on Rule 2165, broker-dealers expressed to FINRA the need for additional time to conduct investigations and resolve matters.
Broker-dealers were asked in a previous survey about possible impediments to resolving a matter within the current 25-business day hold period, and more than half of respondents reported having difficulties, FINRA said.
FINRA’s notice explained that under the safe harbor approach, “a firm would be permitted, but not required, to place a temporary hold on a transaction when there is a reasonable belief that the customer is being financially exploited.”
FINRA states that it “recognizes that placing a temporary hold on a transaction is a serious step for a member and the affected customer. But FINRA also recognizes that placing a temporary hold on the underlying transaction may prevent significant negative financial consequences for the customer. These negative financial consequences can result even if a firm places a temporary hold on any related disbursement of funds out of the customer’s account.”
Moreover, FINRA said, “the rule would include safeguards to protect customers and avoid misapplication of the rule, such as written supervisory procedures reasonably designed to achieve compliance with the rule, including procedures on the identification, escalation and reporting of matters related to financial exploitation of specified adults.”
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