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Protections for Vulnerable Investors

Protections for Vulnerable Investors

| March 12, 2018
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Protecting Our Seniors Just Got Easier

I have always been concerned about protecting our retired clients as they age especially when they are single. In the past, my hands have been tied as to the steps I could take if I saw evidence of them falling victim to financial abuse. For instance, I couldn't pick up the phone and call one of their friends or family members to discuss as that could have been a breach of confidentiality. Thus we have worked hard to identify those we feel could be susceptible, we've kept them close, talked with them often and provided education to help prevent such an event. Thankfully, we have not seen such red flags but now, finally, we have the ability to act should something happen.

FINRA (Financial Industry Regulatory Authority) is the single largest independent regulatory body for securities firms operating in the United States. Their number one task is to protect investors by ensuring that the U.S. securities industry operates in an honest and fair manner.

Recently, they instituted some changes in an effort to provide protections for vulnerable investors, either due to age or disability.

The Financial Exploitation of Specified Adults, FINRA Rule 2165, became effective in early February this year. It allows me and/or my firm to place a temporary hold on disbursement of funds or securities of certain clients if I believe there is financial exploitation of that client occurring by a third party. This could be a "new" friend, a caregiver or even someone with power over that client like a power of attorney, guardian, etc. The hold can last up to 25 days and be rescinded or extended by a court or state agency or regulator. This is a welcome rule!

Additionally, an amendment to FINRA Rule 4512, is now in force and requires that we ask all new clients for a "trusted contact". Clients do not have to provide one but we encourage them to do so. It is someone of their choosing, 18 years or older, that we can call to share information about the client's account if we see something concerning. It could involve financial exploitation concerns and even allows us to inquire about current contact information, health status, and identity of the client's power of attorney, guardian, trustee, or executor. Our firm has decided to take it a step further and request a "trusted contact" from existing clients at next meetings.

I am relieved to have these new rules in force. They provide me with the power to intercede for my clients who have trusted me to act in their best interest and now I can do so when they may no longer be able to do so for themselves.

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