News & Insights

Finra Requests Comment On A Proposed Rule To Limit A Registered Person From Being Named A Customer’s Beneficiary Or Holding A Position Of Trust For Or On Behalf Of A Customer

FINRA is seeking comments on a new rule proposal that would limit any registered person of a broker-dealer from being named a beneficiary, executor or trustee, or to have a power of attorney or similar position of trust, for or on behalf of a customer.  FINRA believes being a customer’s beneficiary or holding a position of trust may present significant conflicts of interest and hopes the proposed rule would help further address misconduct in this area.

The proposed rule would require registered persons give written notice to and get approval from the firm before being named a beneficiary or holding a position of trust for a customer, unless the customer is a member of the registered person’s “immediate family.”  Firms would be required to employ heightened scrutiny in assessing a registered person’s request, with approval only being given when the firm has made a reasonable determination that the registered person assuming such status does not present a risk of financial exploitation.  Firms would also be required to establish and maintain written procedures complying with the rule’s requirements and preserve the written notice and approval for at least three years after the date that the beneficiary status or position of trust has terminated or the bequest received or for at least three years after the registered person’s association with the firm has terminated, whichever is earlier.

We encourage our clients who may be affected by the proposed rule to review Regulatory Notice 19-36,, and submit their comments to FINRA by January 10, 2020.