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FINRA Seeks Comment on New Senior Safeguards

FINRA Seeks Comment on New Senior Safeguards

The Financial Industry Regulatory Authority is asking the industry to provide feedback on rule proposals aimed at helping firms and financial advisors deal with alleged financial exploitation of senior investors.

Under the proposals, firms would be required to collect information for a “trusted contact” when an account is opened or when personal information is updated for investors 65 or older. It’s up to the companies to decide whether to notify the contact—who is required to be 18 or older—that they have been chosen.

“FINRA intends the trusted contact person to be a resource for the firm in administering the customer’s account and in responding to possible financial exploitation,” the proposal states.

The regulator is also proposing a 15-day “safe harbor” period that allows firms to suspend the distribution of funds or securities from the accounts of senior investors when exploitation is suspected. 

The proposal requires firms to notify the trusted contact or an immediate family member that a hold has been placed on the account and why. Firms have up to two business days after placing the hold to send notification and must retain records of it.

Ann-Marie Mason, FINRA’s director & counsel of shared services, said the regulator seeks to help firms deal with individuals with diminished capacity or situations of abuse.

“The way the rule is proposed right now, it asks that you make a reasonable attempt to get the trusted contact information. If the person elects not to give you that information, it doesn't preclude you from opening the account,” Mason said.

FINRA’s proposals are similar to those released by the North American Securities Administrators Association in late September.

NASAA's proposed rule provides immunity from administrative or civil liability for a firm who reports suspected financial exploitation or fraud against a senior. Specifically, the proposal provides for a 10-day hold on the disbursement of funds from suspected accounts, allowing advisors and firms to share that information with adult protective services or state securities regulators.

FINRA is asking firms to submit comments before Nov. 30, 2015.

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