Posted: June 6th, 2017
In March 2017, FINRA adopted FINRA Rule 2165. Financial Exploitation of Specified Adults. Shortly thereafter, the SEC approved the rule with an effective date of February 2018 set in place.
FINRA Rule 2165 allows a FINRA member firm that reasonably believes financial exploitation may be occurring or has occurred to place a temporary hold of up to fifteen (15) business days on the disbursement of funds or securities from the account of a “Specified Adult” customer. A Specified Adult is either (a) a person aged 65 or older; or (b) a person, aged 18 or older, who the firm reasonably believes has a mental or physical impairment that renders the individual unable to protect his or her own interest.
Rule 2165 also establishes additional recordkeeping requirements in order to comply with the rule including identification, escalation and reporting of matters related to the financial exploitation of Specified Adults.
Further, Rule 2165 requires a member firm’s supervisory procedures to identify the title of the person authorized to place, terminate or extend a temporary hold. The person specified at the member firm must serve in a supervisory, compliance or legal capacity.
The rule allows member firms to exercise discretion in placing temporary holds on disbursements of funds or securities from the accounts of Specified Adults. The rule serves as a safe harbor from violations of other FINRA rules, but Rule 2165 raises the question as to whether a stockbroker is qualified to pass judgment on the mental condition of his or her clients.
Additionally, the rule requires members to develop and documents training policies or programs reasonably designed to ensure that associated persons comply with its requirements to aid in identifying tell-tale signs of elder financial abuse.
FINRA Rule 2165 was initially proposed in October 2016. FINRA proposed the rule in light of a model rule developed by the North American Securities Administrators Association (“NASAA”) that several states had adopted at the time.
Contact Our Firm if You’ve Lost Money
Silver Law Group has represented and is currently representing elder investors who have lost much of their life savings due to Wall Street greed and disregard of elder abuse and exploitation laws. Visit our newly-launched website at www.elderfraudattorneys.com for more information.
If you or a loved one has lost money investing due to violation of elder abuse and exploitation laws, you may be able to recover some or all of your losses.
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