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Question

Difficulty: MediumFinancial Exploitation of Senior Investors and Vulnerable Adults

Under FINRA Rule 2165, a member firm that reasonably suspects financial exploitation of a specified adult is authorized to place a temporary hold on executing securities transactions requested by the customer.

Answer: Answer

Answer

The statement is False. FINRA Rule 2165 permits broker-dealers to place a temporary hold on disbursements of funds or securities, but it does not permit temporary holds on trade executions.
The statement is false because the safe harbor under FINRA Rule 2165 applies exclusively to temporary holds on disbursements of funds or securities out of an account. The rule does not permit member firms to freeze or refuse trade executions.

Step-by-Step Solution

1
Identify the regulatory scope of FINRA Rule 2165 regarding financial exploitation of senior investors and vulnerable adults.
FINRA Rule 2165 provides broker-dealers with a safe harbor to take protective measures when financial exploitation of a specified adult is reasonably suspected.
Determining the explicit scope of the rule is required to evaluate the statement.
2
Distinguish between disbursements of funds/securities and trade executions.
The rule specifically covers temporary holds on outgoing disbursements (such as wire transfers or check requests), but does not extend safe harbor protection to blocking or delaying trade orders (buying or selling securities).
A common regulatory misconception is confusing disbursement holds with trade execution halts.
3
Evaluate the truth value of the stem.
Because FINRA Rule 2165 applies strictly to disbursements and not to order executions, claiming that a firm can hold trade executions under this rule is incorrect.
The statement incorrectly extends the rule's authority to trading activity.

Key Concept

FINRA Rule 2165 Disbursement Holds vs. Trade Executions
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Topics

Financial Exploitation of Senior Investors and Vulnerable Adults