FINRA Receives SEC Approval on Rule Proposal Addressing Financial Exploitation of Seniors
WASHINGTON — The Securities and Exchange Commission has approved FINRA’s rule proposal addressing financial exploitation of seniors. FINRA today issued Regulatory Notice 17-11 announcing a February 5, 2018 effective date for the rule proposal.
The changes approved by the SEC involve two key steps to protect investors. First, firms will be required to make reasonable efforts to obtain the name and contact information for a trusted contact person for a customer’s account. Second, firms will be permitted to place a temporary hold on a disbursement of funds or securities when there is reasonable belief of financial exploitation.
"These rules will provide firms with tools to respond more quickly and effectively to protect seniors from financial exploitation. This project included input and support from both investor groups and industry representatives and it demonstrates a shared commitment to an important, common goal – protecting senior investors," said Robert W. Cook, FINRA President and CEO.
The trusted contact person is intended to be a resource for firms in handling customer accounts, protecting assets and responding to possible financial exploitation of any vulnerable investors. The new rule allowing firms to place a temporary hold provides them and their associated persons with a safe harbor from certain FINRA rules. This provision will allow firms to investigate the matter and reach out to the customer, the trusted contact and, when appropriate, law enforcement or adult protective services, before disbursing funds when there is a reasonable belief of financial exploitation. It is a critical measure because of the difficulty investors face in trying to recover funds that they have inadvertently sent to fraudsters and scam artists.
Prior to the implementation date, FINRA will amend its New Account Application Template, a voluntary model brokerage account form that is provided as a resource to firms when they design or update their new account forms, to capture trusted contact person information.
The need for the proposal became clear from calls into FINRA's Securities Helpline for Seniors®, which has highlighted some of the issues firms are facing when it comes to senior investors, including how firms respond when they suspect a senior customer is being exploited. Approaching the second anniversary of its launch on April 20, 2015, the helpline has fielded more than 8,600 calls, recovering over $4.3 million in voluntary reimbursements from firms to customers.
FINRA is dedicated to investor protection and market integrity. It regulates one critical part of the securities industry – brokerage firms doing business with the public in the United States. FINRA, overseen by the SEC, writes rules, examines for and enforces compliance with FINRA rules and federal securities laws, registers broker-dealer personnel and offers them education and training, and informs the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers a dispute resolution forum for investors and brokerage firms and their registered employees. To see if your investment professional is regulated by FINRA, please go to BrokerCheck. And for more information, visit www.finra.org.