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New FINRA Rule 2165 Requires Reporting of Suspected Exploitation

FINRA’s new senior exploitation rule (Rule 2165), Financial Exploitation of Specified Adults, was approved by the Securities and Exchange Commission (SEC) in February of 2017. The new rule may help to protect senior investors from financial exploitation, a growing problem within the financial and securities industries.

FINRA rule changes permit member firms to respond faster to situations where they suspect or have knowledge of senior financial exploitation. When concerns arise, they will be allowed to (1) notify a designated contact person on an account about potential financial exploitation and (2) place disbursements of securities or funds from customer’s accounts on a temporary hold.

Trusted Contact Person

The previous FINRA rule (Rule 4512) required member firms to obtain and maintain information on all customer accounts, but did not require contact information of a trusted contact person on each account. The new FINRA rule (Rule 2165) requires firms to get these details for the contact person who is age 18 or older on every person's account. A trusted contact person may be contacted by a financial or brokerage firm or a broker-dealer if questions, concerns or problems arise with the account.

Temporary Hold on Disbursements

If financial exploitation is suspected, the new FINRA rule allows temporary holds on the disbursement of securities or funds under certain conditions:

  • Accounts of senior adults age 65 and older
  • Accounts of persons age 18 and older with validated physical or mental impairments
  • Reasonable suspicion or knowledge that financial exploitation has occurred

Oral or written notification of a temporary hold on disbursement of securities or funds must be given to all parties authorized on an account, including the trusted contact person listed. Members must also immediately conduct an internal review of the temporary hold. Unless time is extended under Rule 2165, a temporary hold must be released within 15 business days after the date the hold was placed.

The information contained in The Firm’s posts on its blog, fraud alerts, investigations or elsewhere on the site is based upon information obtained from other sources including, but not limited to, news outlets and federal, state, and regulatory agency filings. All suspects and subjects of postings herein are presumed innocent until proven guilty in a court of law or administrative action and any and all crimes are alleged until a court or regulatory agency finds otherwise .

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