The Financial Industry Regulatory Authority (FINRA), a US self-regulatory organization (SRO), said on Thursday it has filed a rule proposal with the US Securities and Exchange Commission (SEC) regarding the financial exploitation of senior citizens and other vulnerable adults via financial schemes.
The FINRA proposal envisions several law amendments that would aim to provide better protection for investors where there is a reasonable belief of financial exploitation of a senior or other vulnerable. On one hand, the SRO has asked the SEC to review the current regulation and to permit firms to place a temporary hold on a disbursement of funds or securities when there is reasonable belief of financial exploitation, and to notify the trusted contact of the temporary hold. On the other hand, it suggests the watchdog should require firms to make reasonable efforts to obtain the name of and contact information for a trusted contact person for a customer’s account.
“If approved by the SEC, this proposed rule change will equip firms with more effective tools to better protect their senior and other vulnerable customers from financial exploitation,” said Robert L.D. Colby, FINRA executive VP and CLO. “With the aging of the investor population, FINRA believes it is important to put these protections in place for our seniors and other vulnerable investors,” he added.
The rule change is not effective until approved by the SEC.
“The need for this rule became clear from calls to the FINRA Securities Helpline for Seniors. Since its launch in April 2015, the helpline has received calls highlighting some of the issues firms are facing when it comes to senior investors, including how firms respond when they suspect a senior customer is being exploited,” according to Susan Axelrod, FINRA Executive VP for regulatory operations.
The FINRA also said that it plans to make amendments to its New Account Application Template (a voluntary model brokerage account form that is provided as a resource to firms when they design or update their new account forms), aiming to capture trusted contact information.
FINRA is an independent entity that acts as a SRO. It regulates all securities firms doing business in the US in every aspect of business – from registering industry participants to examining them, writing and enforcing rules, and informing and educating the public. In addition, the association provides surveillance and other regulatory services for equities and options markets. It also takes on other responsibilities, such as administering the largest dispute resolution forum for investors and firms.