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Broker-Dealer Alert: FINRA to More Closely Examine Compliance with Elder Abuse Rules

02.26.2019

The Financial Industry Regulatory Authority (FINRA) recently indicated that its future exams will check more closely that broker-dealers are complying with the rules it issued in February 2018, which are meant to protect elderly clients from financial abuse and exploitation.

FINRA vice president and associate general counsel James Wrona noted at SIFMA’s Senior Investor Protection Conference this month that the next round of FINRA examinations will more closely review whether the appropriate systems are in place, suspected abuse cases are promptly elevated, and firms have an identified team to deal with the issue.

FINRA Rule 2165 allows broker-dealers to place a hold on elderly clients’ account disbursements if they have a reasonable belief the client is being financially abused. The rule allows for a 15-day hold on the funds.

Wrona said the primary goal of the FINRA exams would be to check on the systems and processes firms have in place, to check that issues are properly elevated and that there's an identified team to handle relevant decisions. FINRA also wants to learn about firms' experiences with compliance, such as areas in which the regulatory authority could assist and any tweaks the agency could make to the rule. He also added that firms placing holds on account disbursements seemingly without forethought or procedure would warrant a closer look.

Some brokerage executives say there's room for improvement with the FINRA rule, noting that it can be difficult to conduct a thorough investigation within the 15-day hold period to determine whether a senior is being financially exploited.

For more information on FINRA rules or how these assessments might impact broker-dealers, please contact Lincoln Gray, Audit Partner and Financial Services Industry Group Leader, at lgray@bswllc.com or 314.983.1235.

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