FINANCIAL PROFESSIONAL SITE
  

This week FINRA announced a rule proposal (not a rule yet, but good possibility) to allow firms 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 financial exploitation is occurring.

The proposal would amend FINRA's customer account information rule to require firms to make reasonable efforts to obtain the name and contact information for a trusted contact person upon opening a customer's account. IPI recommends this as a good practice and conversation piece for advisors to have with all current and new clients. If/when the rule is implemented, we expect to add a field to the new account form.

In addition, the proposal would create a new FINRA rule permitting firms to place temporary holds on disbursements of funds or securities, from the accounts of investors aged 65 or older where there is a reasonable belief of financial exploitation. The proposal would also apply to investors 18 and older if they have mental or physical impairments that render them unable to protect their own interests and there is a reasonable belief of financial exploitation.

This new FINRA rule would not create a duty to place temporary holds on disbursements. Rather, it would provide firms with a safe harbor when they exercise discretion in placing temporary holds on disbursements.