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The Financial Industry Regulation Authority (FINRA) announced a
new proposed rule that will allow member firms to place a temporary
hold on a disbursement of funds or securities when the firm has a
reasonable belief that financial exploitation of a senior may be
occurring. Additionally, the new proposal would allow the firm to
notify a customer's "trusted contact" when such an
event occurs. The proposal will revise FINRA's customer account
information rule and require the member firm to make reasonable
efforts to obtain the name and contact information of a
"trusted contact person" upon opening a new
customer's account. Moreover, the proposal would create a safe
harbor for a member firm to place a temporary hold on disbursements
of funds or securities from the accounts of customers who are age
65 or older, when the firm has a reasonable belief that financial
exploitation may be occurring. Notably, the new FINRA rule would
not create a duty to place a temporary hold on disbursements, but
would allow protection for the member firm if they do exercise
discretion in placing a temporary hold on disbursements.
This action by FINRA is in line with the heightened focus that the
SEC and FINRA are placing on issues related to senior investors and
other vulnerable adults. This also follows the recent joint report,
"National Senior Investor Initiative, A Coordinated Series of
Examinations, the SEC's Office of Compliance Inspections and
Examinations and FINRA," issued by the SEC and FINRA. With an
increasing aging population of investors, we can expect further
regulatory protection for such investors.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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