The Financial Industry Regulatory Authority (FINRA) has submitted new bills designed to protect seniors and other vulnerable adults from financial fraud.
The proposed rules will be moving through the Securities and Exchange Commission (SEC) and require financial firms to report suspected financial exploitation of seniors to regulators and to capture contact information for a trusted contact person for seniors’ accounts.
FINRA has also proposed legislation that would allow financial firms to place a temporary hold on disbursement of funds or securities whenever they believe harm may result to a senior investor and to notify the trusted contact of the temporary hold. In addition, the new proposal would require FINRA to amend its New Account Application Template to include a trusted contact’s information.
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The self-regulator’s current rules do not authorize notifications to third parties nor allow securities broker or investment advisers to place an initial delay of disbursements from an account if financial exploitation is suspected.
In 2015, FINRA launched the toll-free FINRA Securities Helpline for Seniors to provide older investors with a supportive place to get assistance from knowledgeable staff related to concerns they have with their brokerage accounts and investments.
Nick Nichols, Vice President of DST Compliance Solutions, shared with Finance Magnates the following point-of-view about the proposed changes: “Regulations like this, along with recently passed and proposed State regulations are important to protect vulnerable investors. Aging populations and ever-changing complex and creative schemes put more people and their assets at risk. Increased regulations will force an even greater level of attention on these accounts requiring more controls and oversight. This regulation of specifically adding a trusted contact person is excellent, but it’s only a small part of the solution.”
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.”