Examkin

Question

Difficulty: EasyFinancial Exploitation of Senior Investors and Vulnerable Adults

A registered representative suspects financial exploitation when a 68-year-old customer requests an unusual wire transfer to an unverified third party. Under FINRA Rule 2165, which action is the member firm authorized to take?

  1. Place a temporary hold specifically on the requested fund disbursement while allowing requested securities transactions to continue.Answer
  2. B
    Freeze all trading activity in the account, prohibiting the customer from executing any buy or sell orders for securities.
  3. C
    Permanently terminate the account and automatically transfer remaining assets to the designated trusted contact person.
  4. D
    Unilaterally alter the customer's account registration to require dual authorization from compliance for all future trade orders.

Answer

Place a temporary hold specifically on the requested fund disbursement while allowing requested securities transactions to continue.
FINRA Rule 2165 provides broker-dealers with a safe harbor to place a temporary hold on the disbursement of funds or securities from the account of a specified adult when financial exploitation is reasonably suspected. Crucially, this rule applies to outward disbursements (such as wires or checks), not to executing trade orders within the account.

Step-by-Step Solution

1
Identify the relevant regulatory framework governing financial exploitation of specified adults.
FINRA Rule 2165 applies to specified adults (individuals aged 65 or older, or 18 or older with mental or physical impairments).
Understanding the rule's scope determines what protective measures a firm may legally implement.
2
Distinguish between fund disbursements and securities trade execution under the rule.
The rule permits placing a temporary hold on disbursements (transfers or payouts of cash or securities), not on securities trading (buying or selling).
This prevents financial loss through unauthorized transfers while allowing clients to manage market risk in their portfolios.

Key Concept

FINRA Rule 2165 Temporary Disbursement Holds
Rate this question

Topics

Financial Exploitation of Senior Investors and Vulnerable Adults