FINRA Proposes Expanded Fraud Protections and Trusted Contact Flexibility
From the desk of Jim Eccleston at Eccleston Law
The Financial Industry Regulatory Authority (FINRA) has sent three proposed rules to the Securities and Exchange Commission (SEC) for approval. The proposed rules would expand protections against financial exploitation and fraud.
According to ThinkAdvisor, the first proposal would amend Rule 2165, Financial Exploitation of Specified Adults, by extending the maximum temporary hold period from 55 business days to 145 business days. The extension would occur in three 30-day increments, subject to safeguards.
Rule 2165 allows a member firm to temporarily hold a securities transaction or the disbursement of funds or securities from a specified adult customer's account when the firm reasonably believes that financial exploitation has occurred, is occurring, has been attempted or may occur.
FINRA's second proposal, Rule 2166, would address suspected fraud involving customers of any age. The rule would allow firms to delay a disbursement or transaction for up to 10 business days when the firm reasonably suspects fraud.
ThinkAdvisor reports that the third proposal would modify Rule 4512, Customer Account Information, which addresses trusted contact persons. The rule currently requires broker-dealers to make reasonable efforts to obtain trusted contact information when customers open non-institutional accounts.
FINRA would allow broker-dealers to use the term "emergency contact" instead of "trusted contact" and would give customers greater flexibility to designate one trusted or emergency contact across multiple accounts.
As reported by ThinkAdvisor, designation as a trusted contact does not give that person power of attorney-type authority over a customer's account. The designation also does not authorize the contact to execute transactions or make account decisions. Instead, FINRA describes trusted contacts as a resource for firms and customers when special circumstances arise.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
Tags: eccleston, eccleston law, finra, sec, securities regulation, fraud protection, trusted contact
