FINRA Rule 2165: Financial Exploitation of Specified Adults

What is FINRA Rule 2165?

FINRA Rule 2165 FINRA Rule 2165 is a rule that was recently passed to amend FINRA Rule 4512, which governs how financial brokers can access their customers’ account information and their right to take action to protect their clients from securities fraud using this information.

The rule was initially proposed in 2016 and after review by the Securities Exchange Commission (SEC), it passed.

The effective date for FINRA rule 2165 is February 5, 2018.

FINRA Rule 2165 Protects Specific Groups of Adults from Financial Exploitation

Rule 2165 defines “specified adults” as all adults who are 65 years of age or older or who have physical or mental disabilities that impair their ability to advocate for their own financial interests. Brokers who work with specified adults must maintain records of trusted contacts for these clients.

If the broker suspects that a specified adult is a victim of securities fraud, he or she must make a reasonable effort to reach the contact person and if necessary, he or she may place a temporary hold on the client’s account in order to stop disbursements made as the result of exploitation.

Rule 2165 Amends Rule 4512

FINRA Rule 4512 is the rule currently in effect regarding brokers’ responsibilities to maintain records of their clients’ personal information. When Rule 2165 goes into effect, Rule 4512 will be nullified. Currently, brokers maintain information about any parties other than the client associated with the client’s account and their level of authorization.

They are not required to contact these other parties if they suspect abuse is happening, nor are they permitted to place involuntary holds on client’s accounts.

Rule 2165 Gives Securities Brokers More Responsibilities

With this new rule comes new responsibilities for securities brokers. Now, they need to make the call between legitimate transactions and transactions made fraudulently. This can feel like an invasion of the client’s privacy, particularly when the transactions involve family members or similar types of interpersonal exchanges. Every client’s level of impairment is unique and it is possible for a client’s cognitive level to change dramatically from one year to the next.

As America’s population ages, rules like 2165 will likely continue to be put into place to protect the elderly from exploitation. Older Americans hold a significant portion of our nation’s wealth: currently, adults age 65 and older control 75 percent of all financial assets in the nation.

Work with an Experienced Florida Securities Fraud Attorney

When Rule 2165 goes into effect in February 2018, it will provide an additional layer of financial protection for elderly adults and other at-risk groups. But it cannot prosecute alleged offenders of securities fraud, nor can it provide complete protection from exploitation.

If you suspect you or a loved one are a victim of securities fraud, contact our team of securities fraud attorneys at Sonn Law Group to discuss your case and determine the best way to resolve it. Our team is committed to protecting our clients’ rights and interests. We are located in Florida and serve clients from throughout the United States, Puerto Rico, and South America.

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