FINRA’s Proposal to Halt Elder Fraud: Stop Withdrawals



The Financial Industry Regulatory Authority (FINRA) released a new proposal to protect seniors from financial fraud. The rules will allow financial companies to respond to situations in which there is a reasonable belief that financial fraud is occurring. If fully implemented, financial firms would be able to place a hold on the dispersal of funds for up to 15 business days. The temporary hold could be extended for an additional 15 business days under certain circumstances. Note the use of “business days”; conceivably, a person could be denied access to his or her assets for up to six calendar weeks. In addition, financial firms would be required to ask customers for a trusted contact to be reached in cases where fraud is suspected.

The proposal will be covered in the November AAII Journal, which we sent to the printer yesterday. Since a digital format gives more flexibility in terms of space than a print format does, I’m going to expand on what you will read in next month’s issue.

The rules are being proposed for a few reasons. The regulator says that the experience with its Securities Helpline for Seniors (844-57-HELPS) has highlighted issues related to financial exploitation. Financial firms have been in need of regulatory guidance on this matter, and the proposed rules give them a safe harbor they can cite as acting under if legal action by a customer is brought against them. Legislators have been slow to react to the problem of financial fraud among elders; only three states—Delaware, Missouri and Washington—have rules permitting financial institutions to place temporary holds on disbursements and transactions if financial exploitation is suspected.

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The Week Ahead

My colleague, Wayne A. Thorp, will be speaking to our Atlanta Chapter and our Birmingham Chapter on Tuesday and Thursday about how to determine a stock’s true worth. AAII has more than 50 local chapters across the country.

More than 170 members of the S&P 500 will report earnings in what will be one of the busiest weeks for third-quarter earnings. Included in this group are Dow Jones industrial average components Apple (AAPL), E.I. Du Pont (DD), Merk (MRK) and Pfizer (PFE) on Tuesday and Chevron (CVX) and Exxon Mobil (XOM) on Friday.

September new home sales will be the first economic report of note, scheduled for release on Monday. Tuesday will feature September durable goods orders, the August Case-Shiller home price index and the Conference Board’s October consumer confidence survey. The minutes from the October Federal Open Market Committee meeting will be released on Wednesday. Thursday will feature the first estimate of third-quarter GDP and the September pending home sales index. September personal income and spending, the final October University of Michigan consumer sentiment survey, the third-quarter employment cost index and the October Chicago PMI will be released on Friday.

The Treasury Department intends to postpone the two-year note auction originally scheduled for Tuesday. Treasury officials are concerned that debt ceiling constraints would prevent the settlement of the auction. The Treasury Department still plans on auctioning $35 billion of five-year notes and $15 billion of floating two-year notes on Wednesday and $29 billion of seven-year notes on Thursday.

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