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How FINRA Protects Elderly Investors from Financial Exploitation

Elder Financial Abuse on the Rise

If you’re elderly, you’ve hopefully built up a nest egg through years of careful retirement planning and smart money management. Yet it’s an unfortunate reality that, according to FINRA, the Financial Industry Regulatory Authority, “the U.S. Department of Justice estimates that $3 billion is stolen or defrauded from millions of elderly Americans every year.” Anyone can become a victim, but some individuals are more vulnerable than others. “Financial fraudsters tend to go after people who are college-educated, optimistic and self-reliant. Con artists also target those with higher incomes and financial knowledge, and who have had a recent health or financial change,” warns FINRA. Luckily, FINRA has rules to protect elderly investors from scammers and con artists that seek to defraud hard-working people of their hard-earned money.

New FINRA Rules

So how does FINRA protect elderly investors? On February 5, 2018, FINRA introduced new rules designed to prevent financial elder abuse. FINRA Rule 4512 (Customer Account Information) and FINRA Rule 2165 (Financial Exploitation of Special Adults) allow older Americans to take better control of their accounts and allow brokers more flexibility to protect their senior clients if they suspect financial exploitation.

When might your broker suspect you may be the victim of financial exploitation? If you to withdraw a large sum of money when you’re usually more judicious about your financial decisions, that could be a red flag. In this case, it would be helpful for the broker to reach out to your “trusted contact” to get more information. FINRA Rule 4512 (Customer Account Information) now “requires your broker to make reasonable efforts to obtain the name and contact information for a designated trusted contact person for your brokerage account,” according to FINRA. They will contact this trusted person to get more information about “the specifics of your current contact information, health status, or the identity of any legal guardian, executor, trustee or holder of a power of attorney.” You will be notified.  Financial professionals who bring these concerns forth are granted immunity from liability under the Senior Safe Act of 2018.

If they suspect exploitation, FINRA Rule 2165 (Financial Exploitation of Special Adults) allows firms to put a 15-day hold on disbursement while they have time to investigate. If they find information that supports their suspicion of exploitation, they can extend the hold for another 10 days. They will reach out to you and your “trusted contact” and inform them of this. According to FINRA, “brokerage firms now are permitted to put a temporary hold on disbursements of funds or securities from an account when there is reason to believe financial exploitation might be occurring. The rule applies to accounts belonging to investors age 65 and older or to those with mental or physical impairments that the firm reasonably believes makes it difficult for them to protect their own financial interests.”

Expediting Your FINRA Arbitration

If you retain a securities attorney to try to recover funds lost in a Ponzi scheme or other instances of stock fraud, the outcome of your case will likely be decided through arbitration. If you are elderly or are seriously ill, FINRA will move your case along as quickly as possible, making every effort to expedite the arbitration process. That usually means that the arbitration will be scheduled within six months of the Initial Prehearing Conference (IPHC). If you and your attorney decide to go to mediation, FINRA will also help that process move along quickly.

Preventing Fraud

Of course, it would be best if no one ever had to go to arbitration or mediation, if all fraud could be prevented before substantial losses occur. The FINRA Investor Education Foundation provides tools and resources to educate investors. They offer a Fighting Fraud 101 brochure, as well as a Scam Meter—consisting of four easy questions—to help investors quickly ascertain whether an investment opportunity seems “too good to be true.” FINRA also reminds investors to take steps to prevent identity theft.

If you’ve been frustrated or can’t get clear answers from your broker, FINRA also operates the Securities Helpline for Seniors, where FINRA experts are standing by to answer any questions you might have about your investments. The helpline is 844-57-HELPS (844-574-3577) and is manned Monday through Friday from 9 a.m. to 5 p.m. Eastern Time.

FINRA also encourages everyone to read brokers’ BrokerCheck reports. You can access these reports by going to www.finra.org/brokercheck or by calling (800) 289-9999

Financial fraudsters who prey on elderly Americans shouldn’t be able to get away with their crimes. No one wants to think they’ve been the victim of a financial crime, but if you have questions about your broker or investment accounts, don’t hesitate to pick up the phone and call the experienced securities attorneys of Fitapelli Kurta at (877) 238-4174. You can also email info@fkesq.com.