Introduction
As baby boomers continue aging, firms continue seeing an uptick in complaints and arbitrations by senior investors and FINRA continues focusing on protecting those customers. Two principal means by which FINRA pursues that goal are its rules concerning temporary account freezes and trusted contact persons (“TCPs”). FINRA’s 2026 Annual Regulatory Oversight Report (the “Report”) reemphasizes the importance of implementing and documenting policies and procedures that ensure compliance with these rules and provides important guidance concerning best practices.
FINRA’s Rules Concerning Senior Investor Protection
Several FINRA rules provide support for firm’s efforts to protect senior investors. Rule 2165 enables firms to place temporary holds on disbursements of funds or securities from the accounts of 65+ investors if there is a reasonable belief of financial exploitation. Rule 4512 requires firms to make reasonable efforts to obtain contact information of a TCP for customers. TCPs are not POAs, i.e., they do not have authority over the customer’s account and cannot make trading/disbursement decisions. Instead, TCPs are simply “intended to be a resource for the member firm in a host of situations (e.g., helping to update contact information when a customer becomes unavailable, offering assistance when concerns arise over possible diminished capacity or other health issues, protecting assets and responding to possible financial exploitation).”[1] In addition, firms relying on Rule 2165 to delay disbursements or transactions must notify TCPs in writing before taking such actions, unless of course the TCP is suspected in engaging in the underlying financial exploitation. Rule 2165(b)(1)(A)-(B).
The Report’s Findings
In the Report, FINRA identified certain areas in which some firms have not adequately complied with its rules regarding senior investors and TCPs. Specifically, FINRA found that certain firms did not have adequate policies and procedures regarding the process for training FAs and supervisors and recording and escalating instances of suspected financial exploitation. FINRA also found that some firms were not making reasonable attempts to obtain TCP contact information and to provide written disclosures to customers explaining the circumstances where it is appropriate for the firm to contact TCPs.
FINRA’s Recommendations Concerning Best Practices
Most important, the Report highlights effective practices to support firms' efforts to protect senior customers and comply with these rules. To start, firms should review their policies and procedures concerning senior investors and compare them to the following key takeaways from the Report’s summary of effective practices, i.e., that firms should:
- engage with and educate customers to raise senior investor fraud awareness;
- emphasize the importance of collecting TCP information from seniors;
- document and maintain records of training provided to FAs and supervisors;
- establish a system that alerts FAs when accessing customer accounts that do not have a TCP and reminds them to request that information;
- establish procedures concerning how to identify, escalate, and report suspected financial exploitation of senior customers;
- organize specialized groups to handle situations involving elder abuse and diminished capacity.
The protection of senior investors is an evergreen issue. Careful review and implementation of FINRA's guidance will help ensure compliance with its rules, protect customers, and reduce the risk of liability.
[1] FINRA Shares Practices for Obtaining Customers’ Trusted Contacts, Regulatory Notice 22-31, https://www.finra.org/rules-guidance/notices/22-31