Definition of FINRA Rule on Financial Exploitation of Seniors

While many people are living active and productive lives well
into their eighties and beyond, FINRA has enacted rules designed to protect the
financial interests seniors who are 65 or older. FINRA is particularly
concerned about clients being taken advantage of by unscrupulous or otherwise
self-serving people. Registered representatives should have a clear
understanding of the financial, needs, resources and behavior of their clients.
This is specifically important when dealing with older clients who may require
the assets to meet their current financial needs, and who, can fall victim to
bad actors. Registered representatives should be particularly concerned with
any requests to withdraw money from an account which is outside the normal
actions of the client.


Sally is a retired school administrator who is 83 years old
and is living on her assets. Sally and her late husband had planned well for
their retirement. She has the proceeds from her husband’s life insurance
policy, a significant savings and retirement account as well as her social
security. Sally has been a client of your firm for 10 years and generally moves
$1,800 -$2,000 per month from her brokerage account to her checking account.
Twice per year she travels and moves $5,000 to her checking account to pay her
travel expenses. One day Sally calls up and says she needs $35,000 wired to an
out of state bank account. When the agent inquires what this is for Sally says
her friend has told her of an investment opportunity in real estate that she
would like to take advantage of. When the agent inquiries about the opportunity
the details she provides do not sound right to the agent.

Applying "FINRA Rule on Financial Exploitation of Seniors" to Securities Exams:

The example detailed above is a serious red flag, and In this situation the agent
has a significant conflict. On the one hand, the agent is required to do as the
client requests. On the other, the agent feels a duty to protect the client and
senses that their client may be the victim of senior exploitation. Even
discussing the matter with a principal of the firm is not enough to determine
if the client is being taken advantage of.

FINRA’s rules allow broker dealers to withhold distributions
to senior clients in cases of suspected financial exploitation for 15 business
days. During this time the broker dealer
should investigate the client’s request and obtain as much information
regarding the receiving party as they can. To further protect seniors broker
dealers should obtain the name and contact information of a “trusted contact”
for senior clients. The firm in very limited circumstances may contact the
trusted contact to inquire about requests to withdraw money when financial
exploitation is suspected. The firm may also contact the person to inquire as
to the welfare of the client and to inquire as to the identity of any
individual who may hold power of attorney or who may be named as executor of
the client’s Will. If the firm at the
end of 15 business days has gathered information relating to the request that
indicates that this is a case of financial exploitation the firm may withhold
the funds for another 10 business days. The firm should share their findings
with the center for elder abuse as well as with law enforcement.

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