New FINRA Rule Designed To Help Protect Seniors And Other Vulnerable Investors

The Financial Industry Regulatory Authority (“FINRA”) has just approved steps to help protect senior citizens and other potentially vulnerable adults from financial exploitation and abuse.  Referred to by some as a“pause rule,” the proposal would permit brokerage firms to place a temporary hold (or “pause”) a disbursement from a customer’s account if they believed that the customer was being exploited.  After pausing the disbursement, the firm would contact the customer’s “trusted contact” to notify them of the suspicious activity.  While the new rule would not require firms to place a temporary hold on disbursements, it would provide them with a safe harbor if and when the firm did pause suspicious activity.

With the baby boomer generation at or near retirement age, the timing for FINRA could not be better.  FINRA’s CEO specifically referenced the fact that for the next 15 years, roughly 10,000 Americans will be turning 65 each day.

Unfortunately, senior citizens are targeted specifically by financial scammers.  Seniors typically have large amounts of liquid assets in the form of retirement savings.  When coupled with the potential for diminishing mental abilities, this means an easy target and potentially big payday for a con artist with bad intentions.

Under the FINRA proposal, this pause rule would come into play once the account holder reaches the age of 65.  The rule could also apply to those customers over the age of 18 who have a mental or physical impairment that leaves them unable to protect their own interests and the potential target for exploitation.

This is one of a handful of new steps that FINRA has taken recently in furtherance of the protection of senior-aged investors.  This Spring, FINRA launched a senior hotline, allowing senior investors to call toll-free to get assistance with their brokerage accounts.  Since that time, FINRA has reportedly received more than 1500 calls to the hotline.

While implementation of this pause rule would be a step in the right direction, there is still much more to be done to protect potentially vulnerable investors.  While this rule has the potential to stop outsiders from exploiting senior or otherwise vulnerable investors, it would have difficulty preventing the exploitation of them by their own financial advisor and brokerage firm.

A review of the statistics maintained by FINRA about customer complaints and arbitrations filed against financial advisors and their broker-dealers reveals how bad the problem still remains.   Each and every year thousands upon thousands of customers file claims against their financial advisors and broker-dealers.  Likely more never complain because they mistakenly believe their losses were due completely to the market, when in fact they were caused by their broker’s misconduct.

Ultimately, senior investors and their families who suspect that they or their loved ones are being exploited should avail themselves to every resource possible.  These include the FINRA hotline and a free consultation with an experienced investment fraud attorney.

The attorneys at Malecki Law have written extensively on the topic of elder abuse and investor protection.  In fact, Jenice Malecki, Esq. of Malecki Law will be speaking at an upcoming conference of securities lawyers in October about elder abuse in the financial industry.

If you believe that you or a family member have been taken advantage of by a financial advisor, you are encouraged to contact the investment fraud lawyers at Malecki Law for a free consultation and case evaluation at (212) 943-1233.  Malecki Law has successfully recovered millions of dollars for investors who suffered losses as a result of unscrupulous actions taken in their investment and retirement accounts.

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