On February 5, 2018, FINRA will enact two rules to assist brokers with addressing financial exploitation of the elderly. Statistically, the elderly have a 1 in 20 chance of being a victim of financial exploitation. [Financial Exploitation of Older Adults: A Population-Based Prevalence Study, Journal of General Internal Medicine (2015)]. As financial abuse, especially of the elderly, continues to be a concern, the SEC approved FINRA’s request to amend FINRA rule 4512 (“Customer Account Information”), found here, and approved new rule 2165 (“Financial Exploitation of Specified Adults”), found here.
These rules will allow brokers to address situations in which they suspect exploitation by, among other things, permitting brokers to bring in a third-party that the broker can contact if there is a problem contacting the customer. This information can be added to the client’s account documents, although the third-party will not have access to account-specific information. This will provide the broker with another point of contact, which is important during time sensitive situations.
In addition, if a broker suspects abuse in the account, the broker can put a hold on any disbursements from the account to investigate the matter. By enacting these rules, brokers and firms will be in a better position to protect their elderly clients as well as themselves.