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And now the FINRA attack on Seniors

Judicial System Fleeces Seniors Judicial System Fleeces Seniors

FINRA rules

 

Predictably as more and more information becomes available detailing financial abuses against seniors by individuals and institutions, institutional responses to the perceived threats have emerged. As expected, the cures are even worse than the problem.

 

One such response from FINRA has spawned situations in which the abuses even compounded.

 

Effective February 5, 2018, members of the Financial Industry Regulatory Authority (FINRA) have new account obligations for non-institutional customers and are able to take new actions to “protect” the cash and investments of seniors.

New FINRA Rule 2165 provides members with a safe harbor to place temporary holds on the disbursement of funds or securities if the FINRA member reasonably believes that “Financial Exploitation” of its customer has or is occurring or being attempted. Amended FINRA Rule 4512 now requires members to make reasonable efforts to obtain a “Trusted Contact Person” (TCP) for all non-institutional accounts. The TCP is intended to be a resource for members in administering customers’ accounts, protecting assets, and responding to possible scams or Financial Exploitation.

 

According to FINRA, these new rule provisions provide financial services firms including brokerages and banks and credit unions with more effective tools to address suspected Financial Exploitation of seniors and other vulnerable adults. These rule changes primarily accomplish this goal by allowing members and associated persons to: (1) place a temporary hold on disbursements of funds and securities, and (2) notify a customer’s TCP when there is concern that, among other things, the customer may be the victim of Financial Exploitation

 

In order to place a temporary hold on a disbursement, the member must reasonably believe (an incredibly low standard!!) there has been Financial Exploitation of a Specified Adult. The definition of Financial Exploitation is broad under the rule, covering situations in which a third-party wrongfully tries to gain access to the assets of a Specified Adult. The decision to place a temporary hold on a disbursement generates a series of obligations. The member must, within two days of the hold, provide notification to all persons authorized to use the account as well as the TCP (discussed below). The notification may be oral or written and may be provided electronically. The member must also immediately conduct an internal review of the “facts” (as alleged by the member with no oversight!!) that led to the temporary hold. The maximum duration of any hold under Rule 2165 is generally 15 business days unless the internal review supports the initial belief of Financial Exploitation. In that case, a 10-business day extension is permitted. FINRA members that rely on the rule are required to have specific written supervisory procedures to comply with Rule 2165, which must include procedures related to the identification, escalation, and reporting of matters related to the Financial Exploitation of Specified Adults. Notably, the procedures must identify the title of each person authorized to place, terminate, or extend a temporary hold and limit this authority to associated persons who serve in a supervisory, compliance, or legal capacity for the member. Members must also keep records related to compliance with the rule which are available to FINRA upon request. Finally, members relying on the rule are required to develop and document training policies or programs that are reasonably designed to ensure that associated persons are complying with the rule’s requirements.

 

These rule changes, though well-intentioned ostensibly, have already created crises for elderly individuals with accounts shared in joint with other younger family members. Already cases have been reported to AAAPG in Hillsdale County Florida where a credit union officer refused to honor an in person withdrawal request from an 76-year-old woman and her granddaughter to withdraw funds after the sale of a jointly owned property. In response to the request for withdrawal the officer immediately isolated the elderly woman from her granddaughter and began interrogating her in a very aggressive manner.

Her very next move was to approach the Hillsdale County probate court for an emergency temporary guardianship.

Fortunately, the grand daughter in question was an attorney and upon reading my book “Guardianships and the Elderly-the Perfect Crime”,  immediately recognized what was happening and called police to the credit union. The police were clueless about all the new rules of course but their presence allowed the grandmother to be reunited with her granddaughter and for the transaction to be enforced. Then the credit  union refused to close the  account in question even after the infuriated customers took all their funds and went to another banking institution.

Further investigation by the granddaughter/attorney revealed that the same bank officer had obtained an emergency temporary guardianship on another unsuspecting elder in a similar situation.

These new rules allow untrained employees of financial institutions to isolate and interrogate seniors for nothing more than requesting their money simply based on a hunch that there may be some degree of impropriety in any kind of a transaction involving the senior.

Further these rules create tremendous loopholes in the obligations for banks to notify account holders of the hold on their account by any number of methodologies including verbal, written or e-mail. Our experience in probate matters underscores how easy it is to deny due process even if court matters by sending a letter to the wrong address of the wrong e-mail or leaving a message intentionally on the wrong phone number.

Being able to maintain the hold for 10 to as many as 15 days during which time an informal investigation is undertaken by the very people who initiated the hold is long enough for an emergency guardianship to be initiated on an emergency basis.

Putting this much power in the hands of untrained, uncertified, unlicensed, unmonitored bank or investment officials may sound like a terrific idea, but as the case mentioned above demonstrates for those inclined to take advantage of the senior is just another easy way to take what is not yours from someone who is vulnerable and another pathway into the probate hellhole from which there is almost no escape.

Maybe putting your money under your mattress is not such a bad idea after all.

3 Comments on And now the FINRA attack on Seniors

  1. Berna jones // July 9, 2018 at 9:03 pm //

    This must be what happened to Lisa Ann’s neighbor. The bank called when he tried to withdraw some of his own money.

  2. This happened to my mother and i ( her POA) in michigan ! Although she got her “funds”, APS was notified and investigations spawned! This has happened 3 times now!

  3. Harry Scott Boggs // July 14, 2018 at 10:33 pm //

    May I point out a sort-of similiarity between “teller criminals” and “clerk-of-the-court” criminals who’re being trained in Orange County, FL’s Ninth Circuit Court system to go out INTO THE NEIGHBORHOODS to spy about for lonely elders and disabled folk who “look neglected and lost” (sorry for caps, I am livid). YES! This voluntary group of community “Court Clerk Elder Guardians” are more than just nosy or naive goody-goods. This nonsense can parse clearly as nothing but another neo-mob racket. They need to quit peering over the neighborhood’s fences!

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