SEC Approves Rules Relating to Financial Exploitation of Seniors

SEC Approves Rules Relating to Financial Exploitation of Seniors

(Effective Date February 5, 2018)

What new rules were approved?

The Securities and Exchange Commission “SEC” approved the adoption of new FINRA rule 2165 and amendments to FINRA rule 4512.

Why did the SEC approve these new rules?

With the aging of the U.S. population, there is a serious and growing problem of financial exploitation with seniors.  The Financial Industry Regulatory Authority “FINRA” through its securities helpline for seniors has highlighted these issues including the need for members to be able to quickly and effectively address suspected financial exploitation of seniors and other specified adults.

Members can better protect their customers from financial exploitation if they have the ability to contact a customer’s designated trusted contact person and, when appropriate, place a temporary hold on a disbursement of funds or securities from a customer’s account.

What do the new rules mean in general?

Trusted Contact Person – Amendments to rule 4512

The amendments to Rule 4512 require members to make reasonable efforts to obtain the name of and contact information for a trusted contact person upon the opening of a non-institutional customer’s account or when updating account information for a non-institutional account in existence prior to the effective date of the amendments (existing account).

Temporary Hold on Disbursement of Funds or Securities – New Rule 2165

Rule 2165 permits, under FINRA rules, a member that reasonably believes that financial exploitation has occurred, is occurring, has been attempted or will be attempted to place a temporary hold on the disbursement of funds or securities from the account of a “specified adult” customer.

What is a trusted Contact?

A Trusted Contacts someone over the age of 18 whom the client knows and trusts.  This person will serve as a point of contact should we have questions concerning a client’s over all well-being. whereabouts, health status, the identity of any legal guardian, executor, trustee or power-of attorney, or where we suspect the client may be the victim of fraud or exploitation or suffering from diminished capacity.

Do employer retirement plan sponsors have to take any immediate action regarding these new rules?

No, employer retirement plan sponsors do not have to take any immediate action regarding these new rules.

Could employer retirement plan sponsors be indirectly impacted by these new rules?

Yes, employer plan sponsors to be indirectly impacted by these new rules.

An example of this could be where TIAA suspects that there is a reasonable belief of financial exploitation for a customer including a plan participant regarding a requested disbursement. If so, TIAA would be able to hold the disbursement until resolved.

What is TIAA doing regarding these new rules?

Beginning January 22, 2018, TIAA Services will comply with this amended regulation by including Trusted Contact disclosure language in all New Account Welcome Packages, along with instructions for how a client can add Trusted Contact(s) to the account profile. Prior to the rule amendment, TIAA Services has had a process for encouraging client to provide the firm with Trusted Contact information. This new rule amendment and process will now formalize and document TIAA’s efforts to obtain Trusted Contact information from all of our clients.

In the past, TIAA Services has placed hold on disbursements, when necessary, and were permitted by law and regulation, to protect clients’ assets and accounts. This new process will now formalize and document TIAA’s elevation and supervisory processes around these steps to protect clients.

Founded in the 1950s, Carroll Consultants, Ltd. provides investment advisory, retirement plan consulting and administration services to clients throughout the country. For further information about this article, please contact Marcie Carroll at or (610) 225-1210.