Clinic Comments on Proposed Rule to Prevent Financial Exploitation

On November 28, 2016, the Investor Advocacy Clinic submitted a comment on SR-FINRA-039, a proposed rule to prevent financial exploitation of vulnerable investors.  The comment, drafted primarily by student intern David Hsu, responded positively to several changes to the prior version of the rule, including changes that were suggested by the Investor Advocacy Clinic in December of last year when the rule was first proposed.

While continuing to support FINRA’s goals of protecting vulnerable investors, the clinic noted that the proposal would be improved with a few changes.  The clinic recommended that:

(1) FINRA require members to act on a reasonable belief of exploitation before placing a temporary hold on an investor’s account;

(2) FINRA oversee mandatory training to help firms and brokers identify financial exploitation and outline member responsibilities when it is present;

(3) a trusted contact be informed of their designation and be asked whether they wish to serve in that capacity; and

(4) the safe harbor provision not protect a member from violations of FINRA Rules 2010 and 2150.

The clinic’s full comment is available here.