The language used by firms is critical when it comes to successfully obtaining a trusted contact for clients, according to a Financial Industry Regulatory Authority executive.

Finra implemented the amended Rule 4512, titled “Customer Account Information” in 2018. The amendment required broker-dealers to “make reasonable efforts” to obtain the name and contact information of a trusted contact person for a non-institutional customer’s account.

“Messaging it in a certain way is important,” Brooke Hickman, director of the self-regulator’s vulnerable adults and seniors team, said Monday at the 2022 Finra Annual Conference. Hickman and others were part of a panel discussion on senior and at-risk investors.

“We have found that firms that have success in obtaining trusted contact persons are the ones that explain not only what the trusted contact person can do, but also what they can’t do,” she added. “So, they can’t transact on the account, they don’t know the assets that are in the account, they don’t know the value of the account; that’s not under the purview of the trusted contact person.”

Firms are allowed to contact the trusted contact person if they have concerns that the customer is potentially being financially exploited or showing signs of diminished capacity, according to Hickman.

“But the firm is also able to contact the trusted contact person just to find out the customer’s whereabouts so, say, the customer lost their cellphone or they are traveling abroad and they are not able to receive calls, the firm can reach out to the trusted contact person,” Hickman said.

“We have found that the firms who are able to obtain trusted contact people, because some customers are reluctant to provide it, are the ones that explain that,” she added. “And also, the ones that … message it more as ‘it’s someone that we can reach out to if we are unable to reach you because you are traveling’.”

Firms who say, “If we suspect financial exploitation” or “If you’re showing signs of diminished capacity,” have less success in obtaining a trusted contact, according to Hickman.

“Nobody wants to really believe that that is going to happen to them,” she said.

Freezing Accounts

The panelists also discussed Finra Rule 2165, titled “Financial Exploitation of Specified Adults.”

“This is the first uniform national standard for placing a temporary hold on a disbursement of funds and securities on an account or the underlying securities transaction when you have a reasonable belief that the customer is being financially exploited,” said Jeanette Wingler, associate general counsel at Finra’s office of general counsel.

Finra, she noted, has recently adopted a couple of amendments to the rule. In February, Finra amended the rule to give financial firms more power to place holds on suspicious transactions and making those holds almost twice as long.

The previous rule allowed companies to place holds on disbursement of funds or securities, and the amendment now allows them to place holds on securities transactions as well. The amendment also extended the temporary hold on disbursements as well as transactions from 25 business days to 55 business days in cases when the company reports the matter to state regulators or agencies or a court.

“What we heard from firms and also from adult protective services is that they needed additional time,” said Wingler.

Rule 2165 has been in the spotlight following Wells Fargo’s move to freeze the account of talk show host Wendy Williams. The wirehouse froze the account after Wells Fargo advisor Lori Schiller said Williams wasn’t able to manage her finances, according to a petition for an emergency injunction Williams filed in New York state court in February seeking to regain control of her accounts, as reported.

Williams’ lawyer LaShawn Thomas says Wells Fargo used Rule 2165 to freeze the talk show host’s account and Maxwell Billieon, Williams’ representative, has slammed the rule, saying it is susceptible to abuse by firms.

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