The Financial Industry Regulatory Authority’s (FINRA) Board of Governors recently proposed a new rule that aims to protect seniors from financial exploitation.
The proposal would create a new FINRA rule permitting firms to place temporary holds on disbursements of funds or securities from the accounts of investors aged 65 or older where there is a “reasonable belief” of financial exploitation, FINRA said in a statement issued late last week.
In addition, the new proposal would amend FINRA’s customer account information rule to require firms to make reasonable efforts to obtain the name and contact information for a trusted contact person upon opening a customer’s account.
This new rulemaking item is an important step forward that would benefit both investors and firms, said FINRA Chairman and CEO Richard Ketchum in a written statement.
“Each day for the next 15 years, an average of 10,000 Americans will turn 65,” Ketchum said. “Seniors are at risk, and FINRA is committed to helping protecting seniors and other vulnerable adults from financial exploitation.”
Not exclusively solely to seniors, the proposal would also apply to investors age 18 and older if they have mental or physical impairments that render them unable to protect their own interest and there is a reasonable belief of financial exploitation.
FINRA emphasized that this new rule would not create a duty to place temporary holds on disbursements, but rather, it would provide firms with a safe harbor when they exercise discretion in placing temporary holds on disbursements.
FINRA plans to issue a Regulatory Notice to solicit comment on the proposal within the next several weeks.
Last year, FINRA changed its tune on reverse mortgages, when it no longer described these financial instruments as “loans of last resort.”
However, when asked by RMD whether the new rule proposal will apply to reverse mortgages, a FiNRA spokeswoman said the rulemaking item applies to securities accounts, and that “more details will be available when the proposal comes out.”
Written by Jason Oliva
