FINRA Rule 2165, titled "Financial Exploitation of Specified Adults," empowers member firms to temporarily halt suspected financial exploitation of vulnerable individuals. Here's a breakdown of its key points:
Purpose:
To protect individuals 65 years or older and those aged 18 or older with mental or physical impairments deemed unable to protect their financial interests, referred to as "Specified Adults."
To combat financial exploitation, which involves the unauthorized or wrongful taking, control, or use of a Specified Adult's funds or securities.
Key Provisions:
Member firms can place a temporary hold on disbursements or securities transactions from a Specified Adult's account when they reasonably believe financial exploitation is occurring, has occurred, has been attempted, or will be attempted.
The hold duration is 15 business days, but can be extended with specific requirements.
Firms must document their efforts to obtain reasonable evidence to support their belief of financial exploitation.
Firms must notify the Specified Adult, designated trusted contact person (if available), and appropriate authorities.
The rule includes a safe harbor provision protecting firms from potential liability for certain civil actions under other FINRA rules while acting in good faith under Rule 2165.
Benefits:
Provides a crucial tool for early intervention and potential prevention of financial exploitation.
Empowers firms to act responsibly and ethically to protect vulnerable individuals.
Enhances investor protection and helps maintain market integrity.
Important Note:
FINRA Rule 2165 doesn't replace reporting suspected financial exploitation to law enforcement or adult protective services.
It's always important to seek professional legal advice for specific situations.