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Difficulty: MediumFinancial Exploitation of Senior Investors and Vulnerable Adults

Under FINRA Rule 2165, a broker-dealer that reasonably suspects financial exploitation of a 70-year-old client is permitted to place a temporary hold on the execution of pending securities trades within the customer's account.

Answer: Answer

Answer

False. FINRA Rule 2165 permits temporary holds on disbursements of funds or securities out of an account, but does not allow freezing or blocking trade executions within the account.
The statement is false because FINRA Rule 2165 allows broker-dealers to place temporary holds exclusively on disbursements of funds or securities out of an account when financial exploitation is suspected. The rule does not authorize broker-dealers to place holds on trade executions or prevent clients from buying or selling securities within their account.

Step-by-Step Solution

1
Identify the scope of protection provided by FINRA Rule 2165 for specified adults.
Rule 2165 applies to natural persons aged 65 and older or vulnerable adults aged 18 and older with physical or mental impairments.
A 70-year-old client meets the definition of a specified adult under the rule.
2
Distinguish between asset disbursements and trade executions under FINRA Rule 2165.
The rule allows temporary holds specifically on disbursements (transfers, wires, or checks leaving the account).
It explicitly does not grant authority to block trade executions (buying or selling securities within the account).
3
Evaluate the truth value of the statement.
The statement claims trade executions can be held under Rule 2165, which is incorrect.
Because the rule only authorizes holds on disbursements out of the account, the statement is false.

Key Concept

FINRA Rule 2165 Disbursement Holds vs. Trade Execution
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Topics

Financial Exploitation of Senior Investors and Vulnerable Adults