The Financial Industry Regulatory Authority (FINRA) announced its approval of a rule in a press release to help brokerage firms protect seniors citizens and other vulnerable adults from financial exploitation. The heart of the proposal allows a firm to place a temporary hold on a disbursement of funds or securities and notify a customer’s trusted contact when the firm has a reasonable belief that the customer may be the subject of financial exploitation. According to FINRA, an average of 10,000 Americans will turn 65 every day for the next 15 years.
In our practice, often time accountants, attorneys, or children of elderly investors contact our firm when they suspect that there has been elder abuse or unfair trade practices in the handling of an elderly persons’ accounts. As long time readers of our blogs know senior abuse is an ongoing concern in the securities industry. See Massachusetts Fines LPL Financial Over Variable Annuity Sales Practices to Seniors; The NASAA Announces New Initiative to Focus on Senior Investor Abuse; The Problem of Senior Investor Abuse – A Securities Attorney’s Perspective; Senior Abuse in the Securities Industry A Major Ongoing Concern
In the past, regulators have expressed worry that brokers may be placing seniors in risky investments that chase yield such as inappropriate nontraditional investments like variable annuities, non-traded real estate investment trusts (Non-Traded REITs), structured products, and other alternative products. Regulators have warned brokers that the dangers of seniors’ chasing yield through alternative investments comes from the fact that they don’t have as much time as other clients for them to pay off. In addition, if these investments fail the result is a major loss of irreplaceable life savings.
Often times older clients are lucrative targets for brokers because they tend to amass substantial retirement assets as compared to younger investors. But coinciding with increased assets are substantial risks that advisors and other non-licensed persons may try to take advantage of vulnerable seniors. An aging population has caused regulators and brokerage firms to increase their training with investment advisers and brokers to protect senior investor.
The proposal would amend FINRA’s customer account gathering information rules to require firms to make reasonable efforts to obtain the name and contact information of a trusted contact person when a person opens an account with a brokerage firm. In addition, firms would be allowed to place temporary holds on disbursements of funds or securities for investors aged 65 or older where there is a reasonable belief of financial exploitation. The proposal would also apply to younger investors if they have mental or physical impairments that could make them unable to protect their interests and financial exploitation may be present.
This rule change comes in addition to FINRA’s recently established a toll-free FINRA Securities Helpline for Seniors where elderly investors can seek assistance from FINRA staff regarding concerns about their portfolio or their broker. According to FINRA, in the hotline’s first eight days of existence the line took about 100 calls from people ranging in age from 40 to 99, according to FINRA. The line is part of FINRA’s efforts to try to find and identify problems before it grows to the level of triggering a FINRA case that really only occurs once substantial harm is realized by seniors.
Investors who have suffered investment losses caused by broker misconduct may be able recover their losses through securities arbitration. The attorneys at Gana LLP are experienced in representing investors in cases where their broker has acted inappropriately. Our consultations are free of charge and the firm is only compensated if you recover.