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Difficulty: EasyFinancial Exploitation of Senior Investors and Vulnerable Adults

Under FINRA Rule 2165, a member firm that reasonably suspects financial exploitation of a specified adult has the regulatory authority to place a temporary hold on which of the following?

  1. Disbursements of funds or securities from the customer's accountAnswer
  2. B
    Executions of buy and sell trade orders submitted by the customer
  3. C
    The customer's authority to designate or update a trusted contact person
  4. D
    The generation and delivery of monthly account statements to the customer

Answer

Disbursements of funds or securities from the customer's account
Under FINRA Rule 2165, broker-dealers are permitted to place a temporary hold strictly on disbursements of funds or securities from the account of a specified adult when financial exploitation is reasonably suspected. This helps protect senior investors from having assets fraudulently transferred out.

Step-by-Step Solution

1
Identify the scope of FINRA Rule 2165 regarding financial exploitation of specified adults.
Rule 2165 permits member firms to place a temporary hold on disbursements.
The rule is designed to prevent the unauthorized transfer or withdrawal of assets from a vulnerable customer's account.
2
Distinguish between fund/security disbursements and trade executions.
Disbursement holds restrict moving cash or securities out of the account, whereas trade executions (buying or selling) remain unaffected by a Rule 2165 hold.
Preventing trade executions could cause market risk losses and is beyond the scope of a Rule 2165 disbursement hold.

Key Concept

FINRA Rule 2165 Temporary Hold Scope
Estimated Time:45s
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Topics

Financial Exploitation of Senior Investors and Vulnerable Adults