Updated: May 29, 2020
Article from AARP Daily Report
Stockbrokers can now place holds on clients accounts if they suspect fraud
Those vulnerable to financial abuse and exploitation are getting protection under the first national standards to protect senior investors.
Older Americans lose billions of dollars each year to scammers and fraud. But those vulnerable to financial abuse and exploitation are getting some fresh protection under the first national standards to protect senior investors.
The Financial Industry Regulatory Authority (FINRA), a private independent regulator of U.S. securities firms, now requires stockbrokers and securities firms to identify and reach out to a client’s “trusted contact” if they suspect he or she is being financially exploited. Brokers must now ask their clients to designate a trusted contact, who may have a client’s power of attorney, be named on their account or be a trustee of a client.
Another new FINRA rule will enable brokers to place a temporary hold on an account if they suspect a client is mentally or physically incapacitated and susceptible to fraud or a scam. The hold can last up to 25 days while a suspect transaction is investigated.
“These important changes, developed in collaboration with our members, provide firms with tools to respond more quickly and effectively to protect seniors and vulnerable investors from financial exploitation," says FINRA Chief Executive Officer Robert Cook. “With the aging of the U.S. population, financial exploitation is a serious and growing problem, and protecting senior investors remains a top priority for FINRA.”
Neither of these new FINRA rules applies to banks. AARP has two initiatives designed to help protect older Americans from financial fraud. BankSafe is working to provide financial institutions, including banks, training to help protect customers from financial exploitation. And AARP Foundation’s ElderWatch program enlists volunteers to help older consumers recognize and report fraud and scams.
While the new FINRA rules cover brokerage clients of all ages, older Americans are more likely to be targeted for financial abuse and likely to lose more money due to poor health and isolation.
“One of five older Americans are victims of financial exploitation," says Jilenne Gunther, the director of AARP’s BankSafe initiative. “It’s nearly impossible to recover money once it leaves someone’s account.”
A 2016 study by investment advisor Allianz Life found that 37 percent of active caregivers said the elder in their care had experienced financial abuse or exploitation, with an average loss of $36,000.
The FINRA rules “are a great step to empowering the financial industry to better protect and empower consumers,’’ Gunther says. “It allows brokers to be proactive in preventing financial exploitation.”