In April 2015, the Financial Industry Regulatory Authority ("FINRA") launched its Securities Helpline for Seniors" (the "Helpline"). The Helpline seeks to enhance investor protection by serving as a resource to seniors making investment decisions. FINRA reports that, since its launch, the Helpline has fielded over 2,500 calls. The Helpline has received calls from persons ranging in age from 22 to 100; the average age of callers was 70 years old. Over the course of this initiative, FINRA has used the information gathered from these calls to assist seniors, detect fraud, and to identify ways that firms can guard against exploitation of seniors within their own organizations.
This article primarily focuses on this last point by highlighting the effective firm practices presented in FINRA's year-end report of the Helpline. These practices are as follows:
- Obtain the contact information, upon account opening, of a trusted person to reach out to for concerns about the senior's account.
- Avoid conflicts of interest by limiting a registered representative's ability to occupy a position of trust, such as serving as a power of attorney or trustee, for their client.
- Establish someone within the firm who focuses on, and serves as the contact person for, senior investor issues.
- Train staff to identify potential client incapacity or elder abuse and to report these problems.
- Publish client-focused educational materials to inform senior investors and help protect them from possible scams.
- Keep your firm up to date on senior issues by joining industry groups focused on combating elder abuse and by hosting or attending symposiums discussing these issues.
- Exercise caution in terminating relationships with aged clients.
- Implement policies and procedures to handle instances of diminished mental capacity among employees of the firm.
- Understand and carefully explain to clients the tax consequences of transferring assets from qualified accounts.
- Ensure paperwork regarding distribution of account assets upon death accurately reflects the current wishes of the client.
The firm practices discussed in the report are not necessarily current rule requirements. However, these practices represent helpful guidance from FINRA as to items that broker-dealers may wish to consider implementing as a "best practice." And of course, several of them may become the "law of the land," as discussed in our summary of FINRA's recently proposed Rules 4512 and 2165, which is available here.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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