FINRA has proposed new rules to protect senior investors and other vulnerable adults from financial exploitation. The proposed rules would require member firms to make reasonable efforts, at the time of account opening for a senior investor, to obtain the name and contact information of a trusted contact person. The proposed rules would also allow firms to place a temporary hold on a disbursement of funds or securities from the accounts of investors aged 65 or older, and to notify the designated “trusted contact,” when the firm has a reasonable belief that financial exploitation is or might be occurring. The same rule would also apply to any investor, aged 18 or older, with a mental or physical impairment that might render the investor unable to protect his or her own interests. According to FINRA, the rule would not create a duty, but rather a safe harbor for firms when they exercise discretion in placing a temporary hold on disbursements. FINRA plans to issue a Regulatory Notice seeking comment on the proposal.
The proposed rules follow FINRA’s toll-free senior hotline for older investors, established spring 2015. The hotline provides a resource for concerns senior investors may have with their brokerage accounts and investments, including, among other things, service complaints, sales practice issues, and calls from children of deceased parents trying to locate or move assets. In its press release yesterday announcing the proposed new rules, FINRA noted that it has received more than 1,500 calls to the hotline since April. These moves signal FINRA’s continued focus on the interests and protection of senior investors.
FINRA also announced a new proposal to incorporate existing guidance on expungement into the Code of Arbitration Procedure. The existing guidance advises arbitrators with regard to expungement requests by brokers (including the documents, such as a BrokerCheck report, that arbitrators should review when considering an expungement request); if approved, the steps articulated in the guidance would become new FINRA rules.