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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