By Neda Ghomeshi
On November 30, 2015, the Investor Rights Clinic (IRC) submitted a comment letter to FINRA in regard to Regulatory Notice 15-37. The Regulatory Notice sought comments on proposed rules to address the financial exploitation of seniors and other vulnerable adults. The notice proposed amendments to Rule 4512, Customer Account Information, which would require firms to obtain the name of and contact information for a trusted contact person for a customer’s account. The IRC fully supported those amendments; however, its comment letter focused on FINRA’s proposed rule, Rule 2165, Financial Exploitation of Specified Adults. Rule 2165 would permit qualified persons of firms to place temporary holds on disbursement of funds or securities from the accounts of specified adults where there is a reasonable belief of financial exploitation of those customers. The proposed rule does not create an obligation to place a hold on funds or securities where financial exploitation may be occurring. In its letter, the IRC supported FINRA’s efforts to protect seniors and vulnerable adults; however, the IRC encouraged FINRA to mandate the rule as opposed to its current permissive language.
To support its position, the IRC provided FINRA with alarming statistics. For example, approximately 10,000 people will turn 65 every day for the next 15 years. Also, an estimated one million elders lose over $2.9 billion each year due to financial abuse. As a non-profit legal organization dedicated to protecting investors, particularly elderly investors, the IRC passionately advocated for a mandatory reporting process for any reasonable belief of financial exploitation of an elder.
More specifically, the IRC referenced the 21 states and the District of Columbia that require financial institutions to adhere to reporting requirements. The IRC explained that adding a mandatory reporting obligation to the proposed rule would provide uniform protection for the most vulnerable of the nation’s investors. Furthermore, it would promote the interest of investor protection and ensure protection for seniors who are being financially exploited.
FINRA will evaluate the comments submitted by the public and, if it makes any material changes to its proposed rules, may issue revised rules for additional comments. Otherwise, FINRA will submit the proposed rules to the SEC for review and the SEC’s comment process.