News & Insights

Finra Requests Comment On Rules And Issues Relating To Senior Investors

FINRA commenced a retrospective review of its rules and administrative processes meant to help protect senior investors from financial exploitation and is now requesting comment on suggested changes to and creation of rules and administrative processes addressing the issue.

FINRA is requesting feedback on proposed expansions to Rule 2165, which permits a member firm to place a temporary hold on disbursement of funds or securities from the account of a “specified adult” customer.  The proposed expansions to the Rule are holds on securities transactions, holds on accounts of customers with diminished capacity, and holds longer than 25 days.  FINRA is also considering developing a dedicated Rule 2165-related problem code for use in meeting reporting requirements pursuant to Rule 4530 and issuing guidance on when complaints related to 2165 temporary holds should be reported on Forms U4 and U5.

FINRA is also assessing the effectiveness of Rule 4512, which requires members to obtain the name of and contact information for a trusted contact person at the time of opening and updating a non-institutional customer’s account, and considering amendment of Rule 3240, which provides a regulatory framework to member firms for control over lending arrangements between registered persons and their customers, to provide better coverage of loan arrangements with senior customers.   

Further suggestions are rulemaking to explicitly prohibit or limit the ability of registered persons to be named as beneficiary, executor, power of attorney, trustee, or similar positions of trust on the account of a non-family member customer and the inclusion of the customer’s age or physical or mental impairments in the “principal considerations” of FINRA’s Sanction Guidelines.

FINRA requests feedback as to the effectiveness and efficiency of the current rules and administrative processes, as well as whether they should be changed.  We encourage our clients to submit comments after reviewing Regulatory Notice 19-27 in full and evaluating the suggested changes on business practices.  Regulatory Notice 19-27 can be found at http://www.finra.org/sites/default/files/notice_doc_file_ref/Regulatory-Notice-19-27.pdf, and the deadline to submit comments is October 8, 2019.