4. FINRA Adopts A Version Of The Model Act’s Hold Provision
In March of 2017, the SEC approved the adoption of FINRA Rule 2165, which adopts and expands upon the Model Act’s hold provision. The FINRA rule goes further than the Model Act, by permitting member firms to delay disbursement for an additional 10 days if, following an internal review of the circumstances, a reasonable suspicion of abuse remains. Rule 2165 also requires firms effectuating a transactional hold under the rule to “develop and document training policies or programs reasonably designed to ensure that associated persons comply with the requirements of this Rule.” Finally, the SEC also approved an amendment to FINRA Rule 4512, requiring member firms to make reasonable efforts to obtain the name and contact information of a trusted third party for each customer’s account. These new FINRA provisions will be effective as of February 5, 2018.
5. What This Means For Financial Services Firms
Based on the growing senior population, the statistics showing an increase in the number of reported cases of abuse, as well as the state and federal interest in protecting seniors, financial institutions should expect significant scrutiny of their efforts to mitigate the financial exploitation of seniors. Therefore, financial services professionals would be wise to closely monitor state and federal laws and regulations, implement compliance policies and require training aimed at protecting senior investors.
Richard Szuch, a principal at Bressler, Amery & Ross P.C., has been practicing law for 30 years. Szuch is a former prosecutor and focuses most of his time on issues related to the financial services business.