Two Important Rules Go Into Effect on Monday


Starting on Monday, industry regulator FINRA will require brokers to ask for a trusted contact when an individual investor opens an account or a firm is updating client information. A trusted contact is a person the brokerage firm can contact if financial exploitation is suspected. A brokerage firm may also rely on the trusted contact “to confirm the specifics of the customer’s current contact information, health status, or the identity of any legal guardian, executor, trustee or holder of a power of attorney.”chart

Additionally, effective Monday, brokers will be able to temporarily block the distribution of funds if they reasonably believe that financial exploitation “is occurring, has been attempted, or will be attempted.” The rule applies to investors who are age 65 or older. It also applies to an individual age 18 or older who is reasonably believed by the brokerage firm to have “a mental or physical impairment that renders the individual unable to protect his or her own interests.”

I realize that at this point many of you reading this have questions about the new rules. I will address some of the biggest questions that I anticipate many of you will have. FINRA has a list of frequently asked questions (FAQ) about the rules on its website. You can also see the trusted contact and temporary hold on distributions rules on FINRA’s website. As a quick aside, I have asked FINRA to contribute an article to the AAII Journal about their elder fraud initiatives, but have yet to get a yes or no answer from them.

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The Week Ahead

Fourth-quarter earnings season will remain busy with 93 members of S&P 500 scheduled to report earnings. Included in this group is Dow component Walt Disney Co. (DIS), which will report on Tuesday.

The week’s first economic report will be the ISM’s January non-manufacturing index, released on Monday. Tuesday will feature December international trade data and the December JOLTS report.

Seven Federal Reserve officials will make public appearances: St. Louis president James Bullard on Tuesday; New York president William Dudley, Chicago president Charles Evans and San Francisco president John Williams on Wednesday; and Dallas president Robert Kaplan, Minneapolis president Neel Kashkari and Kansas City president Esther George on Thursday.

The Treasury Department will auction $26 billion of three-year notes on Tuesday, $24 billion of 10-year notes on Wednesday and $16 billion of 30-year bonds on Thursday.

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