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SEC Approves Finra Senior Financial Protection Rule

By Alex Padalka March 31, 2017

The SEC has approved a proposal from Finra aimed at protecting senior investors and shielding financial firms from liability when reporting suspected fraud against elderly clients, according to a press release from Finra.

Financial firms will now be required to “make reasonable efforts” to get the contact information of a trusted person for a client’s account, the industry’s self-regulator says. Meanwhile, financial firms will be allowed to place temporary holds on disbursements when there’s cause to suspect financial exploitation, according to Finra. The goal is to allow advice firms and other financial companies to confirm disbursements with the client, the trusted contact or adult protection as well as law enforcement agencies, the regulator says in its press release. The rule goes into effect next February, Finra says.

The proposal was the result of consultations with both the industry and investor groups, Robert Cook, the regulator’s president and CEO, says in the press release. But the impetus for the new rule was the response to Finra’s telephone hotline set up in 2015, according to the regulator. In less than two years, Finra received more than 8,600 calls, which in part led to the recovery of $4.3 million for customers, the regulator says.

The hotline revealed that senior investors are targeted through various scams, from fake lottery winnings to binary options, Finra said in November.

One in five Americans over 65 has been the victim of fraud, which amounts to $2.9 billion a year. Lawmakers are also trying to make it easier for financial firms to prevent senior fraud. Last month, senators reintroduced the Senior Safe Act, a bill that would shield firms from legal liability arising from privacy protection laws when reporting suspected financial exploitation of senior clients. The House of Representatives approved the act last summer.