FINRA Proposes Changes to Combat Fraud and Protect Senior Investors

The Financial Industry Regulatory Authority has unveiled a proposal to modernize its investor protection framework, seeking to provide member firms with more robust tools to shield customers, particularly senior investors, from financial exploitation and sophisticated fraud schemes. The proposed changes, part of the FINRA Forward initiative, follow a detailed review of current market threats and feedback from investor protection groups and advisory committees.

FINRA is requesting public comments on these amendments through March 9, 2026.

Rule 4512: Customer Account Information

Despite the proven value of naming a trusted contact, a 2024 FINRA Foundation survey found that only 42% of investors have authorized one for their accounts. To boost adoption, FINRA is proposing several flexibility-driven amendments to Rule 4512.

• Emergency contact option: Firms would be permitted to use the more familiar term “emergency contact” as an alternative to “trusted contact person.”
• Universal designation: New provisions would allow customers to apply a single trusted contact across all existing and future accounts at a firm, rather than requiring separate authorizations for each individual account.
• Clarifying authority: FINRA emphasized that naming a contact does not grant that person power of attorney or the ability to execute transactions; it simply provides a point of contact for firms concerned about the account holder’s well-being.

Rule 2165: Financial Exploitation of Specified Adults

Current regulations under Rule 2165 allow firms to place temporary holds on disbursements when financial exploitation is suspected. However, firms have reported that complex investigations by Adult Protective Services or other authorities often exceed the current 55-business-day limit.

The proposal introduces a structured framework to extend these holds:

• New maximum hold: The maximum hold period could be extended to 145 business days via three separate 30-day extensions.
• Required safeguards: To utilize these extensions, firms must document reasonable follow-up efforts with government authorities and maintain a “reasonable belief” that exploitation is occurring.
• Expanded reporting: Firms would be explicitly permitted to report suspected exploitation to federal authorities, in addition to state agencies.

Rule 2166: Temporary Delays for Suspected Fraud

Recognizing that fraud tactics like “urgency and isolation” target investors of all ages, FINRA is proposing Rule 2166. This new rule would establish a “speed bump” mechanism for any customer account, regardless of the holder’s age.

Under this rule, firms could place a delay of five business days on transactions if they have a reasonable belief of fraud. This window is intended to facilitate outreach to the customer – away from a perpetrator’s influence – to provide educational resources and gather more information. This approach aligns with FBI campaigns urging the public to “Take A Beat” before acting on high-pressure financial requests.

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