The Securities and Exchange Commission (SEC) approved a rule last week proposed by the Financial Industry Regulatory Authority (FINRA) to protect investors, particularly seniors, from financial exploitation.
The changes require financial firms to make reasonable efforts to obtain the name and contact information for a trusted contact person for a customer’s account. Firms will also be permitted to place a temporary hold on a disbursement of funds or securities when there is reasonable belief of financial exploitation.
“These rules will provide firms with tools to respond more quickly and effectively to protect seniors from financial exploitation,” Robert Cook, FINRA president and CEO, said. “This project included input and support from both investor groups and industry representatives and it demonstrates a shared commitment to an important, common goal – protecting senior investors.”
The rule change will go into effect on Feb. 5, 2018.
FINRA said the rule allowing firms to place a temporary hold enables them to investigate the matter and reach out to the customer, the trusted contact and, when appropriate, law enforcement, before disbursing funds when there is reasonable belief of financial exploitation.
The need for the proposal became clear from calls into FINRA’s Securities Helpline for Seniors. In two years since its launch on April 20, 2015, the helpline has fielded more than 8,600 calls, recovering over $4.3 million in voluntary reimbursements from firms to customers.