It happens more than you might think: A senior investor suddenly asks his broker to withdraw all the funds from his brokerage account. The request strikes his broker as strange, because the client normally takes a more measured approach to managing his money.
It’s a red flag that raises a worrying question in the broker’s mind: Is her client being preyed upon by a scammer? Is the client being pressured by a family member or caregiver? If so, should she still disburse the funds as asked? Or should she take time to determine whether her suspicions are justified?
“With the aging of the U.S.
population, financial exploitation
is a serious and growing problem,
and protecting senior investors
remains a top priority for FINRA,”
said Robert L.D. Colby, FINRA’s
Chief Legal Officer.
The protection of senior investors has always been a top priority for the Financial Industry Regulatory Authority (FINRA). As part of this ongoing effort to thwart financial exploitation, FINRA adopted rules earlier this year that allow brokers to take steps to protect seniors and other specified adults, putting in place the first uniform, national standards to protect senior investors. Some states have adopted similar rules as well.
Here’s how the new FINRA rules work.
Add a Trusted Contact Person to Your Account
When you open a brokerage account or update information related to an existing account, an amended FINRA rule requires your broker to make reasonable efforts to obtain the name and contact information for a designated trusted contact person for your brokerage account. Among other things, adding a trusted contact person to your account puts your broker in a better position to keep your account safe.
While you are not required to provide this information to open an account, it may be a good idea to do so. By choosing to provide this information, you are authorizing the firm to contact someone you trust and disclose information about your account only in certain circumstances, including to address possible financial exploitation, and to confirm the specifics of your current contact information, health status, or the identity of any legal guardian, executor, trustee or holder of a power of attorney. You will receive a written disclosure from the firm that lays out these details.
Fund Disbursement Holds When Exploitation is Suspected
Additionally, brokerage firms now are permitted to put a temporary hold on disbursements of funds or securities from an account when there is reason to believe financial exploitation might be occurring. The rule applies to accounts belonging to investors age 65 and older or to those with mental or physical impairments that the firm reasonably believes makes it difficult for them to protect their own financial interests.
“Before this new rule, firms were really struggling with this day to day,” said Jeanette Wingler, an attorney in FINRA’s Office of the General Counsel. The new rule gives “the firms time to investigate when a request for a disbursement raises red flags.”
Here’s how the rule works: If a firm suspects financial exploitation, it may put a hold on disbursements from …read more
Source:: Daily times