FINRA’s New Rule to Protect Investors When Their Mental Capacity has Been Diminished or Compromised

By Andrew Greenidge

It’s a fact of life: Most people have more money to invest as they grow older, as well as a wealth of wisdom and experience to guide them. Yet, while the vast majority of older investors are sharp as ever, age can also bring with it a heightened risk of cognitive decline, whether caused by a mild stroke, the early onset of Alzheimer’s, or simply a natural consequence of aging.

Unfortunately, there are stockbrokers and financial advisors who will exploit a vulnerable client and will place trades or employ investment strategies that line only their own pockets disregarding their clients’ best interest.

Recently, the SEC and FINRA have taken steps to protect investors from this type of financial harm. In March 2017, the SEC approved:

1. The adoption of new New FINRA Rule 2165 (Financial Exploitation of Specified Adults) to permit members to place temporary holds on disbursements of funds or securities from the accounts of specified customers where there is a reasonable belief of financial exploitation of these customers; and
2. Amendments to FINRA Rule 4512 (Customer Account Information) to require members to make reasonable efforts to obtain the name of and contact information for a trusted contact person for a customer’s account.

New Rule 2165 and the amendments to Rule 4512 become effective February 5, 2018 (See Regulatory Notice 17-11: SEC Approves Rules Relating to Financial Exploitation of Seniors).

While the implementation of these rules is a step in the right direction, it cannot guarantee your full protection or remedy past harm. But you can sue a financial advisor, stockbroker and even their brokerage firm to recover your losses if you believe they have financially exploited you or someone you love. The attorneys at Epperson & Greenidge have firsthand experience litigating cases involving financial exploitation of the elderly. Even when there are no losses, courts and FINRA arbitration panels have awarded millions of dollars when financial advisors exploit investors who were mentally impaired at the time an investment was made. Even if the victim has passed away, the victim’s estate or heir can file a claim.

If you or someone you know has lost money investing as a result of a broker or financial advisor’s misconduct, call the experienced attorneys at Epperson & Greenidge at (877) 445-9261 for a free consultation. You may be eligible to recoup your losses. Epperson & Greenidge accepts all cases on a contingency basis; we only get paid if and when you collect money. Time to file your claim may be limited, so we encourage you to avoid delay. Call (877) 445-9261 now to speak to an attorney for free.