FINRA Launches New Investment Protection to Combat Elder AbuseFinancial abuse of senior citizens is a growing trend as more and more Americans are living longer. All the wise steps financial advisors recommend to working adults saving for retirement can backfire spectacularly when retirees become the target of financial predators.

To combat this, FINRA has drafted a new rule to target the financial exploitation  of adults over 65 and any person 18 years or older who has a mental or physical impairment and cannot protect their own interests. The new rule will be FINRA Rule 2165, titled “Financial Exploitation of Specified Adults,” and will go into effect on February 5, 2018.

Targeting disbursement rather than transactions

FINRA’s suggestion was that brokers be able to freeze accounts and prevent disbursements (the payment from a fund). It seems that investment professionals have noted a greater frequency of unlawful disbursement requests than simple trades or transactions, which makes sense, as those looking to defraud vulnerable investors are likely looking for immediate profit. However, FINRA has not ruled out a future edict blocking investments and other transactions in cases of suspected elder abuse. The goal was to block the more immediate issue first, and then reassess to see whether transactional abuse increased in the vacuum left behind.

Rule 2165 is very explicit about what constitutes financial exploitation of the elderly or impaired:

  • Taking, withholding, or use of an individual’s funds or securities; and/or
  • Any act or omission by a person in order to gain control in an inappropriate way of money, assets or property; and/or
  • Conversion of that money, property, or assets, without full and uninfluenced agreement of the owner.

This move by FINRA and the SEC sends a clear message to brokers, investment firms, and advisors that failure to note financial exploitation of the elderly or impaired constitutes not simply an ethical violation but a legal one, which could lead to the loss of reputation, fines, or prison. However, this is not the first step FINRA has taken to protect older adults from financial predation. They also maintain a toll-free securities helpline specifically for seniors. For adults who haven’t reached senior status, FINRA also offers guidance about recognizing broker fraud and abuse, as well as keeping records of every active financial professional’s history, in terms of both sustained and unsubstantiated accusations of misconduct.

With all these resources, conducting due diligence about a financial professional should be a regular practice. But many investors do not know about these options until after they have lost money or been mistreated by a broker or investment firm. The Frankowski Firm’s lawyers are here to assist when your rights have been ignored or maligned. If you or someone or an older loved one has lost money through inappropriate financial conduct of a caretaker or investment professional, please contact The Frankowski Firm at 888-741-7503 to discuss your potential legal remedies or complete the contact form.