FINRA Expands Firms' Power to Curb Senior Exploitation

The Financial Industry Regulatory Authority has adopted amendments to Rule 2165 (Financial Exploitation of Specified Adults) to permit member firms to institute hold periods on securities transactions in cases of suspected financial exploitation of older adults.

The amendments, as explained in Regulatory Notice 22-05, permit member firms to:

• place a hold on a securities transaction (in addition to the already permitted hold on a disbursement of funds or securities) where there is a reasonable belief of financial exploitation; and
• extend a temporary hold on a disbursement or transaction for an additional 30 business days, beyond the current maximum of 25 business days (for a total of 55 business days), if the member firm has reported the matter to a state regulator or agency, or a court of competent jurisdiction.

The amendments to Rule 2165 become effective March 17.

Rule 2165 is the first uniform national standard for placing temporary holds to address suspected financial exploitation.

Since Rule 2165 became effective in 2018, temporary holds have provided member firms a way to quickly respond to suspicions of financial exploitation before potentially ruinous losses occur for the customer, FINRA says.

FINRA’s report for the five-year anniversary of the Securities Helpline for Seniors highlights several examples of placing temporary holds on disbursements to address financial exploitation.

For example, the notice explains that temporary holds were put in place by member firms to prevent older investors from losing:

• $200,000 (representing approximately two-thirds of the investor’s account) related to a Central Intelligence Agency lawsuit scam;
• $10,000 in a lottery scam;
• $60,000 in a romance scam; and
• $50,000 to financial exploitation by a brother-in-law.