According to the Financial Industry Regulatory Authority, some brokers have been preying on their elderly clients. About 5% of elderly clients who are mentally competent say that they have fallen prey to their brokers. The federal authority thinks the number is closer to 20% when you add in seniors who struggle mentally, such as those with Alzheimer’s and dementia.
What have brokers been doing?
Under the previous Rule 3270, brokers were circumventing the law. The Financial Industry Regulatory Authority, or FINRA, has had over 2,500 calls to their senior hotline since July 2020. Representatives say that in many cases, the broker would transfer the client to another team member or financial advisor. They might even have them move the power to make financial decisions to one of their family members. Then, the broker would make financial decisions in their own best interest before transferring control of the senior’s finances back to themselves.
Seniors or family members who believe that a broker has taken advantage of the senior may want to talk to a FINRA lawyer. Since the problem was so widespread, FINRA implemented a new rule called Rule 3241. This rule makes it very difficult for brokers to name themselves as beneficiary, executor, trustee or power of attorney for a senior. If they do so, then they must report it to their supervisors. The supervisors must approve brokers naming themselves as controller over a senior’s affairs.
The new rule makes it illegal for brokers to tell seniors who they should control their affairs. It also prohibits the broker from being named as a beneficiary, executor, trustee or power of attorney for six months after they resign these positions. If the broker moves to a new firm, then the new firm must approve or disapprove any relationships where the broker is a controlling agent over a senior’s affairs.
It is everyone’s job to protect the assets of seniors who can no longer do it for themselves. If you believe this has happened to a family member, you should encourage them to contact a lawyer.