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FINRA PROPOSES RULE TO CURB ELDER FINANCIAL ABUSE

By Erwin J. Shustak, Esq. of Shustak Reynolds & Partners, P.C. posted on Tuesday, November 22, 2016.

Erwin J. Shustak, Esq.
619.696.9500 ex. 109
[email protected] 

FINRA recently proposed a rule that would allow brokers to report suspected financial exploitation of seniors and other vulnerable investors. The measure, which is pending approval by the SEC, requires brokers to make “reasonable efforts” to identify a “trusted contact” for investment accounts. It also permits the firms to prevent further distribution from any such accounts and notify the contact person if the broker suspects the client is a victim of financial abuse.

Brokers who suspect the beneficiary of accounts is the subject of financial abuse could freeze the accounts of clients who are 65 or older, or over 18 and have a mental or physical impairment that “renders the individual unable to protect his or her interests”.

While many financial advisors praise the goal of the rule, there are concerns that it will place an undue burden on brokers to identify actual cases of abuse. The rule potentially imposes on brokers and their firms an obligation to be able to investigate, and identify, financial abuse without proper training or ability to do so. And, if the firm and broker make a wrong call, some are worried it may subject the firms to liability either for acting to hastily or not acting quickly enough.

Shustak Reynolds & Partners, p.c. focuses in the areas of securities, financial services and complex business disputes. For more information, contact our managing partner, Erwin Shustak. More information is available at www.shufirm.com.

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