FINRA Proposes New Rule to Further Protect Seniors and Vulnerable Adults From Financial Exploitation

Corporate & Securities Update

Client Alert
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.

This will be among the many topics discussed at Bradley Arant’s upcoming seminar with the Mississippi Securities Division on October 7, 2015, in Jackson, Mississippi.