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New Brokerage Account Rules Help to Protect Seniors From Financial Scams

June 2, 2018

As the U.S. population ages, elder financial abuse is predicted to be a growing problem. Vulnerable people can become victims of scammers who are able to convince people to send money from banking and investment accounts. According to the Financial Industry Regulatory Authority (FINRA) (the organization which regulates firms and professionals selling securities in the United States) its Securities Helpline for Seniors has received over 12,000 calls and recovered more than Five Million Dollars for seniors whose investment funds were illegally or inappropriately distributed since it opened in 2015.

To further try to combat this issue, FINRA has issued two new rules to help investment brokers or advisors to protect seniors’ accounts from this exploitation. The rules went into effect in February 2018. They apply when opening a brokerage account or updating information for an existing account.

First, at the time of account opening the broker or investment advisor must ask the investor for the name of a trusted contact person. This is someone the broker can contact if there are questions about the account. The trusted contact is intended to be a resource for the broker to address possible financial exploitation and to obtain the customer’s current contact information and health status or learn about any legal guardian, executor, trustee or holder of a power of attorney.

The second rule allows a broker to place a temporary hold on disbursements if those disbursements seem suspicious. This rule applies to accounts belonging to investors age 65 and older or investors with mental or physical impairments that the broker reasonably believes make it difficult for the investor to protect his or her own financial interests. Before disbursing the funds, the brokerage firm will be able to investigate the disbursement by reaching out to the investor, the trusted contact, or law enforcement.

Prior to these rules, privacy issues prevented contact with family members when suspicious activity was detected. Also, under previous FINRA rules brokerage firms risked liability for halting transactions thought to be suspicious. These new rules are intended to combat these issues.

Read about the new rules here.

Frequently Asked Questions about the new rules here.

Filed under: Legal Posts

Posted By: Christopher Miller

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