WASHINGTON — The Financial Industry Regulatory Authority (FINRA) submitted to the Securities and Exchange Commission (SEC) proposed rules addressing the financial exploitation of seniors and other vulnerable adults. FINRA is proposing amendments that would require firms to make reasonable efforts to obtain the name of and contact information for a trusted contact person for a customer’s account. In addition, FINRA is proposing a new rule that would permit firms to place a temporary hold on a disbursement of funds or securities when there is reasonable belief of financial exploitation, and to notify the trusted contact of the temporary hold. The rule change is not effective until approved by the SEC.
Currently, FINRA’s rules do not explicitly permit firms to contact a non-account holder or to place a temporary hold on disbursements of funds or securities where there is a reasonable belief of financial exploitation of a senior or other vulnerable adult.
Robert L.D. Colby, FINRA Executive Vice President and Chief Legal Officer, said, “If approved by the SEC, this proposed rule change will equip firms with more effective tools to better protect their senior and other vulnerable customers from financial exploitation. With the aging of the investor population, FINRA believes it is important to put these protections in place for our seniors and other vulnerable investors.”
Susan Axelrod, FINRA Executive Vice President, Regulatory Operations, added, “The need for this rule became clear from calls to the FINRA Securities Helpline for Seniors®. Since its launch in April 2015, the helpline has received calls highlighting 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.”
FINRA also plans on amending 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 information.
Once the proposal is filed with the SEC, SEC staff reviews the rule proposal to determine whether it is consistent with the requirements of the Securities Exchange Act of 1934 (Exchange Act). The SEC staff may request changes or amendments to the rule proposal.
FINRA, the Financial Industry Regulatory Authority, regulates all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing rules, enforcing those rules and the federal securities laws, and informing and educating 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 the largest dispute resolution forum for investors and firms. For more information, please visit www.finra.org.