FINRA Receives SEC Approval on Rule Proposal Addressing Financial Exploitation of Seniors

WASHINGTON–(BUSINESS WIRE)–The Securities and Exchange Commission has approved FINRA’s rule
proposal addressing financial exploitation of seniors. FINRA today
issued Regulatory Notice 17-11 announcing a February 5, 2018 effective
date for the rule proposal.

The changes approved by the SEC involve two key steps to protect
investors. First, firms will be required to make reasonable efforts to
obtain the name and contact information for a trusted contact person for
a customer’s account. Second, firms will be permitted to place a
temporary hold on a disbursement of funds or securities when there is
reasonable belief of financial exploitation.

“These rules will provide firms with tools to respond more quickly and
effectively to protect seniors from financial exploitation. This project
included input and support from both investor groups and industry
representatives and it demonstrates a shared commitment to an important,
common goal – protecting senior investors,” said Robert W. Cook, FINRA
President and CEO.

The trusted contact person is intended to be a resource for firms in
handling customer accounts, protecting assets and responding to possible
financial exploitation of any vulnerable investors. The new rule
allowing firms to place a temporary hold provides them and their
associated persons with a safe harbor from certain FINRA rules. This
provision will allow firms to investigate the matter and reach out to
the customer, the trusted contact and, when appropriate, law enforcement
or adult protective services, before disbursing funds when there is a
reasonable belief of financial exploitation. It is a critical measure
because of the difficulty investors face in trying to recover funds that
they have inadvertently sent to fraudsters and scam artists.

Prior to the implementation date, FINRA will amend 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, to capture trusted contact person information.

The need for the proposal became clear from calls into FINRA’s
Securities Helpline
for Seniors®, which has highlighted 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. Approaching the second
anniversary of its launch on April 20, 2015, the helpline has fielded
more than 8,600 calls, recovering over $4.3 million in voluntary
reimbursements from firms to customers.

FINRA is dedicated to investor protection and market integrity. It
regulates one critical part of the securities industry – brokerage firms
doing business with the public in the United States. FINRA, overseen by
the SEC, writes rules, examines for and enforces compliance with FINRA
rules and federal securities laws, registers broker-dealer personnel and
offers them education and training, and informs the investing public. In
addition, FINRA provides surveillance and other regulatory services for
equities and options markets, as well as trade reporting and other
industry utilities. FINRA also administers a dispute resolution forum
for investors and brokerage firms and their registered employees. To see
if your investment professional is regulated by FINRA, please go to BrokerCheck.
And for more information, visit


Michelle Ong,
Nancy Condon,