Starting February 5, financial brokers will have two new tools to try to stop elder financial abuse.
On that day, Finra is enacting rules to make it easier for brokers to bring an outside party into a situation where financial abuse or exploitation of an elderly person is suspected, and to allow brokers to delay payments from an account if something seems suspicious.
Both rules make it easier to stop financial abuse and represent a good step forward, according to financial industry sources.
The first rule, an amendment to Rule 4512, requires brokers to ask clients for a trusted contact who the broker can reach out to if there is a problem contacting the account holder or if any type financial exploitation is suspected. The client does not have to provide a contact if he or she does not want to, but the broker has to ask, said Jim Wrona, vice president and associate general counsel for Finra.
The trusted contact cannot be given any private information about the account, but can be alerted that something may be wrong and he should check on the client.
The second provision, Rule 2165, is known as the safe harbor rule. It allows a broker who suspects abuse or exploitation to put a 15-day hold on any disbursement from an account while the firm investigates. If necessary, the hold can be extended an additional 10 days, Wrona said.
In the meantime, the firm can bring in state authorities, offices on aging, or law enforcement authorities. “Finra does not say what the firm should do during this time, but it gives them time to investigate because once money is gone from account, it is gone forever,” he said. “Different states have different reporting requirements.
“We want to be proactive in addressing elder abuse or exploitation and these are the two biggest issues that keep coming up when we talk to brokers,” Wrona added. “Finra has been at the forefront of addressing issues of elder financial abuse and we will continue to look at the problem to see what can be done.”
Lisa Bleier, managing director and associate general counsel of the Securities Industry and Financial Markets Association (SIFMA), said brokers are out in front on this one. "Hopefully the rules could apply to RIAs through the Securities and Exchange Commission and banking institutions at some point in the future. Also, the ability to put a hold on accounts applies to disbursements only, not to transfers from one account to another. It also would be a good proposal in the future if banks could speak to one another when fraud is suspected.”
SIMFA is holding workshops to educate its members about the challenges that face elderly people and has a toolkit on its website about financial schemes and what to look for.