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Caring For Generations

New Securities and Exchange Commission Rule to Protect Seniors

On Behalf of | Mar 7, 2018 | Elder law

The same sheriff is in town, but there are some brand new rules. The Securities and Exchange Commission just last month approved – FINRA Rule 2165, officially called the Financial Exploitation of Specified Adults. What’s it all about?

Financial services companies are now allowed to place temporary holds on disbursements of funds or securities from a customer’s account when there is a reasonable belief of financial exploitation of these customers. In addition, an amendment to FINRA Rule 4512, which governs the way customer account information is collected and stored, now requires financial companies to make reasonable efforts to obtain the name and contact information for a trusted person for a customer’s account.

In explaining the reasoning behind the changes, the FINRA Regulatory Notice says: “With the aging of the U.S. population, financial exploitation of seniors is a serious and growing problem.”

For our attorneys at Geyer Law, this is hardly “new news”. As Indiana elder law attorneys, we join the Indiana Attorney General, the FBI, and now FINRA in constantly preaching the need for vigilance in fighting scams that target senior citizens.
“As an individual ages, his risk for financial exploitation increases dramatically,” financial planning certificant Tom McAllister reminds blog readers. The National Adult Protective Services Association defines “financial exploitation” as occurring when a person misuses or takes the assets of a senior or other vulnerable adult for his own person benefit.  Exploitation may involve:

  • deception
  • false pretenses
  • coercion
  • harassment
  • duress
  • threats

When it comes to investment accounts, the new FINRA Rule 2165 allows broker-dealers to place a temporary hold (for up to 25 business days) on disbursement of funds or securities from an account if the broker-dealer has reason to believe that financial exploitation of a client:

  • has occurred
  • is occurring
  • has been attempted
  • will be attempted

While disbursements out of the account are put on hold, the hold does not apply to transactions in securities. Meanwhile, investment advisers can encourage their clients to look at their entire estate plan to ensure that they have given durable power of attorney to trusted people. 
As FINRA explains in the regulatory notice, if a financial advisor “suspects that a customer is suffering from Alzheimer’s disease, dementia, or other forms of diminished capacity.” That advisor could reach out to the trusted contact person to address possible financial exploitation. At FINRA, the Financial Industry Regulatory Authority, the new rules are all about protecting seniors.