FINRA Chairman and Chief Executive Officer Richard Ketchum explains the necessity of protecting the vulnerable against financial fraud –
Each day for the next 15 years, an average of 10,000 Americans will turn 65. Seniors are at risk, and FINRA is committed to helping protect seniors and other vulnerable adults from financial exploitation. This proposal is an important step forward that would benefit both investors and firms.
On Thursday, September 17, 2015, FINRA passed a new rulemaking proposal that aims to protect the elderly and other vulnerable individuals from investment fraud. To further protect seniors from financial exploitation, FINRA’s proposal would allow firms to place a temporary hold on disbursements and securities if they believe there is illicit activity taking place.
Upon opening customer accounts, firms are encouraged to use reasonable effort to obtain information for a trusted individual to serve as a contact for the account. In addition to this small measure, firms would also have the right to temporarily withhold payments or securities if they suspected the transactions were at risk for financial abuse. This rule would apply to customers over the age of 65 and investors 18 years of age and over who have mental or physical impairments that impede their ability to monitor their investments. Both groups are probable targets for potential financial exploitation.
The new proposal would allow securities and investment firms to use their own discretion in trying to protect the elderly. While the new rule would not create an affirmative duty to place temporary holds, it would provide firms with a safe harbor from liability if they exercise discretion in doing so. This proposal is a great step towards investor protection of vulnerable groups and will benefit brokerage firms as well.
As is required with new rules, FINA will issue a Regulatory Notice soliciting comments on this proposal within the next few weeks. In order to become effective, the Securities and Exchange Commission will need to approve the final rule.
