A 66-year-old customer contacts a broker-dealer requesting an urgent $25,000 wire transfer from her account to an unverified third party to collect alleged sweepstakes winnings. The registered representative suspects that the customer is a victim of financial exploitation. Which of the following actions is the broker-dealer permitted to take under FINRA Rule 2165?
- Place a temporary hold on the fund disbursement while allowing requested security trades to execute normally.Answer
- BPlace a temporary hold on security trade executions in the account while completing the requested fund disbursement.
- CFreeze all trade executions and fund disbursements indefinitely until an external law enforcement investigation completes.
- DTransfer the requested cash amount directly to the customer's designated trusted contact person instead of the third party.
Answer
Place a temporary hold on the fund disbursement while allowing requested security trades to execute normally.
Under FINRA Rule 2165, when a broker-dealer reasonably suspects financial exploitation of a specified adult (individuals aged 65 or older, or individuals 18 or older with mental or physical impairments), the firm is permitted to place a temporary hold on disbursements of funds or securities out of the account. Importantly, this authority applies to disbursements, not to trade executions.
Step-by-Step Solution
Key Concept
FINRA Rule 2165 Financial Exploitation Temporary Disbursement Holds