FINRA Proposes New Rules to Protect Seniors

The Financial Industry Regulatory Authority (FINRA) has proposed new rules to address the financial exploitation of seniors and other vulnerable adults to the Securities and Exchange Commission (SEC).  As set forth in in FINRA rule release (SR-FINRA 2016-039), FINRA is proposing rule 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 by the member firm of financial exploitation, and to notify the trusted contact of the temporary hold.

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.”

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.

The proposed rule changes will not be effective until approved by the SEC.