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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