October 8, 2019
Submitted via e-mail: [email protected]
FINRA
1735 K Street, NW
Washington, DC 20006
Re: Regulatory Notice 19-27
To Whom It May Concern:
Thank you for the opportunity to provide feedback on the recently enacted FINRA Rule 2165 and the amendments to Rule 4512. SIFMA1 appreciates the work that FINRA has undertaken to protect senior and vulnerable adults from financial exploitation, and we believe these rules have been helpful new tools in the fight against financial exploitation.
Financial exploitation of senior and vulnerable adults is a serious issue that has implications for the individual as well as the nation. On the individual level, seniors may lose their savings to bad actors, leaving them unable to maintain their independence or pay for their own healthcare. At a national level, seniors lose an estimated $2.9 billion every year in cases of financial exploitation reported by media outlets, while only an estimated 1 in 44 cases is ever reported to the authorities. We know the true cost of financial exploitation is in the billions of dollars, but data has been difficult to pull together due to the low percentage of documented cases.2 We appreciate that FINRA is looking to further improve and expand the tools available to firms to help combat financial exploitation.
I. Report and Hold Rule 2165
a. FINRA 2165 Should be Expanded to Include Transactions
Rule 2165 permits a financial services provider to place a temporary hold on a disbursement of funds from the account when the firm reasonably believes there is financial exploitation. This has been a helpful tool in protecting assets from inappropriately leaving the institution and enriching bad actors. However, this tool is only able to protect investors from one part of the preventable harm they face when they are exploited. For this reason, we appreciate FINRA asking whether they should expand the rule to also protect investors from exploitative transactions. FINRA should. Expanding the rule to include transaction protections will help protect against exploitative purchases, sales or asset liquidations, which are some of the types of transactions that can lead to significant harm.
1 SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s nearly 1 million employees, we advocate for legislation, regulation and business policy, affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA).
2 We are hopeful that passage of the bi-partisan, bi-cameral Senior Security Act will help lead to the collection of more data. The legislation, introduced by Rep. Josh Gottheimer (D-NJ) and Rep. Trey Hollingsworth (D-IN) passed the House on April 30, 2019, and is still awaiting Senate movement.