Senior Investors and Fraud

by Julie Mendel | Aug 29, 2018
FINRA Senior Investors and Fraud

Do You Know the FINRA Rules Regarding Fraud and Schemes Targeting Senior Investors?

FINRA continues to make fraud (and prevention) a focus in examinations—specifically, fraud and schemes targeting senior investors. Working with seniors takes patience and skill, as well as a heightened sense of your obligations. Taking advantage of a senior investor would be quite easy for someone with less than honorable motives, as well as those who innocently ignore certain signs of diminished capacity, loss of hearing, reduced vision, or reduced mobility. These are all impairments common to seniors, and it is your responsibility to take each of them into consideration when dealing with your senior customers and ensuring that they are not exploited.

To assist the financial services professional, FINRA has rules[i] in place to enhance the ability of broker-dealers to identify, report, and further combat exploitation efforts for seniors with diminished capacity.

The Rules Say…

The first rule ii has added a provision requiring that reasonable efforts must be made to obtain the name and information for a trusted contact person for non-institutional customers’ accounts at the time of opening or update. The purpose is to ensure that there is an individual in place that can assist with administering the customer’s account, protecting the customer’s account assets, and who can assist where financial exploitation is expected. While the rule does not require obtaining this information, it is expected that legitimate efforts be made to obtain the information.

In cases where the trusted contact has been identified, the rule requires that a written disclosure be made to the customer confirming that the trusted contact could be contacted with information about the customer’s account. The disclosure should specify what information may be obtained and/or shared with the trusted contact, including, but not limited to:

  • confirming the specifics of the customer’s current contact information
  • discussing the customer’s health status
  • ·verifying the identity of any legal guardian, executor, trustee, or holder of a power of attorney

The second rule iii is new and is aimed at curbing financial exploitation of specified adults. Specifically, this rule allows members to place a hold on disbursement of funds from a “specified adult” customer in cases where it is believed that financial exploitation may be in play. There are two definitions contained in this rule that require clarification.

Under the rule, financial exploitation is defined as …wrongful or unauthorized taking, appropriation, or use of a Specified Adult’s funds or securities or any action…through power of attorney, guardianship…to obtain control [or convert], through deception, intimidation, or influence over a Specified Adult’s money, assets, or property.

The rule defines a specified adult as a natural person who is:

  • age 65 and older or
  • age 18 and older and who is believed to have a mental or physical impairment, making them unable to protect their own interests

For more on these FINRA rules pertaining to Senior Investors and their duties to protect their senior clients from exploitation, visit the FINRA Senior Investors Page. To add more courses on these topics to your training plan, check the WebCE Firm Element Catalog and contact our support services at 877-488-9319 or email [email protected].

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