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Brokers Can Block Disbursements to Senior Investors Under New FINRA Rule

 

Following recent SEC approval, FINRA’s new rule allowing firms to block disbursements to senior investors goes into effect on February 5, 2018.  The rules allow members to put a 25-day hold on suspicious disbursements of funds for any customers over the age of 65 and for any other customer that the member reasonably believes has a relevant mental or physical impairment.  The rule allows, but does not require, a member to hold funds if the member “reasonably believes that financial exploitation…has occurred, is occurring, has been attempted, or will be attempted.”  During the hold, the member must try to contact the designated “Trusted Contact Person” previously named by the account holder.  To enforce the rules, members must adopt and implement applicable written supervisory procedures and ensure retention of relevant records.

 

OUR TAKE: The new rules create significant compliance obligations for account opening, procedures, testing, and record retention.  They also will likely require a process to resolve potential conflicts between senior investors and the brokers that hold their assets.

 

http://www.finra.org/sites/default/files/Regulatory-Notice-17-11.pdf

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