Ensuring that a customer’s money is protected is an important task of financial services businesses. Not only is the protection of a customer’s identity and funds important for bank security reasons, but also for preventing money laundering and other financial crimes, as well as maintaining customer relations and a business’s good reputation. FINRA Rule 2165 is designed to protect senior investors from losing money when suspicious activity is detected. Here’s an overview of FINRA rule 2165 and how it protects senior investors—
What Is FINRA Rule 2165?
Amendments to FINRA Rule 2165 were finalized in March 2022. The rule allows two primary actions to take place:
- Firms can place a hold on a securities transaction when the firm has a reasonable belief that financial exploitation is occurring; and
- Firms can extend the hold on the transaction from the original 25 days to a total of 55 business days if the suspicion has been reported to state regulatory, agency, or a court with jurisdiction.
Firm Requirements for Placing a Hold on Transactions
In order to place a hold on a senior investor’s securities transaction, the firm must meet the following requirements:
- Reasonably believes that financial exploitation is occurring
- Provides notification of the hold to all authorized parties
- Immediately initiates a review of the facts and circumstances
- Maintains written procedures related to FINRA Rule 2165
- Escalate the request for a hold to a supervisor or compliance department
- Develops and documents training programs designed to ensure internal compliance with the rule
- Retains records related to compliance with the rule, which will be provided to FINRA upon request
Can FINRA Rule 2165 Really Protect Senior Investors?
According to FINRA.org, Rule 2615 has already been effective in protecting senior investors from exploitation. To be sure, a few instances of note wherein the rule has prevented senior investors from losing money include $200,000 in a scam CIA lawsuit, $10,000 in a lottery scam, $60,000 in a romance-involved scam, and $50,000 in a familial exploitation scam.
Get Help Understanding FINRA Rule 2165
If your financial service business is relying on FINRA Rule 2615, it is important that it maintains compliance with all requirements related to the rule, as well as other financial regulatory matters. At Bates Group, our experienced consultants can help your business understand, implement, and monitor FINRA Rule 2165 and related policies and procedures. To learn more about the rule and the services we provide, reach out to our team by phone or online today. We are here to serve you.
