I have blogged in the past about the thorny issues confronted by broker-dealers and financial advisors when it comes to dealing with elder clients. FINRA has, for one, proposed rulemaking to address one important situation.
Under the proposed rulemaking, a firm will be able to place a temporary hold (although it will have no duty to do so) on an account of investors aged 65 or older "where there is a reasonable belief of financial exploitation." This proposal will also amend FINRA's customer account information rule to require firms to make a reasonable effort to obtain the name and contact information for a "trusted contact person" when an account is opened.
Of course, this proposed rule will not work if the "trusted contact person" is the person trying to steal the elder client blind. Nevertheless, this proposed rule is a step in the right direction.
Throughout the many years that I have represented broker-dealers and investment advisors, I have frequently witnessed the unfortunate reality of financial exploitation by family members and friends. This proposed rule will provide a safe harbor for broker-dealers who place a temporary hold on a suspected account.
This proposed rule will be subject to a period of comment before it can be adopted. Either way, it is a step in the right direction. All too often, family members look at the broker-dealer to explain how it let someone exploit an elderly family member and customer when the firm had nothing to do with it.
Under this rule, a firm can at least take some action, albeit on a temporary basis, to stop suspected financial exploitation. Hopefully, that will insulate broker-dealers who are not complicit in the exploitation from being handed the bill of the fraudster.
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