Finra could consider allowing holds on transactions if elder fraud suspected

The organization may eventually broaden a rule that already covers disbursements from brokerage accounts

Sep 13, 2017 @ 5:15 pm

By Greg Iacurci

Finra is weighing an expansion of a rule to protect seniors from fraudulent disbursements from brokerage accounts to include fraudulent transactions as well, according to an executive at the regulatory organization.

The Finra rule in question is Rule 2165, which allows broker-dealers to place a temporary hold on disbursements from brokerage accounts if there's reasonable belief of elder financial exploitation. The rule, proposed in last fall, goes into effect in February 2018.

"It's about disbursements" of funds or securities, said James Wrona, vice president and associate general counsel at the Financial Industry Regulatory Authority Inc., the self-regulatory organization overseeing broker-dealers and their registered representatives. "It doesn't apply to transactions. That is something we're still considering."

(More: Finra: Who's watching the watchdog?)

Disbursements caused by elder financial abuse are a bigger problem for firms than transaction-related abuse, Mr. Wrona said at a Securities Industry and Financial Markets Association event in New York on Wednesday. Therefore, Finra wanted to tackle rules for disbursements first.

But if fraudulent brokerage transactions emerge as a problem after the first tranche of rulemaking, "we'll consider broadening the rule to cover those," Mr. Wrona told InvestmentNews.

He alluded to some of the potential challenges involved in such a process, such as placing a hold on a transaction when an investor wants to take advantage of the price of a security at a given time.

Finra's rule is coming into effect at a time when regulators are beefing up investor protections around elder financial abuse.

Last year, the North American Securities Administrators Association issued a model rule requiring financial advisers to report suspected abuse to state and other authorities, allowing them to stop disbursements from seniors' accounts and giving them protection from liability. Several states, including Alabama, Indiana, Louisiana and Vermont, passed laws in 2016 that followed or replicated the NASAA rule.

NASAA executives expect more states to follow suit.

A recent InvestmentNews investigation found instances of elder financial abuse stemming from the U.S. opioid epidemic are increasing.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

Cybersecurity: Fears and opportunities for every adviser

Phishing schemes and financial hoaxes put advisers and their clients in the line of fire everyday. Joel Bruckenstein, the godfather of FinTech, offers some solutions for every firm.

Latest news & opinion

Tax reform debate sparks fresh interest in donor-advised funds

Schwab reports new accounts up 50% from last year, assets up 33%.

Nontraded REITs to post worst sales since 2002

The industry is on track to raise just $4.4 billion, well off the $19.6 billion it raised just four years ago, as new regulations hinder sales.

Broker protocol for recruiting a boon for clients

New research finds advisers whose firms have joined the agreement take better care of customers.

Meet our 2017 Women to Watch

Introducing 20 female financial advisers and industry executives who are distinguished leaders, advancing the business of providing advice through their creativity and hard work.

Raymond James executives call on industry to keep broker protocol

Also ask firms to pay for the administration of the protocol to 'ensure its longevity and relevance.'

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print