4974 Federal Register / Vol. 87, No. 20 / Monday, January 31, 2022 / Notices 

10 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 92573 

(Aug. 5, 2021), 86 FR 44062. Comments on the 

proposed rule change can be found at: https://

www.sec.gov/comments/sr-nysearca-2021-53/ 

srnysearca202153.htm. 

4 15 U.S.C. 78s(b)(2). 

5See Securities Exchange Act Release No. 92999, 

86 FR 52539 (Sept. 21, 2021). 

6 15 U.S.C. 78s(b)(2)(B). 

7See Securities Exchange Act Release No. 93534, 

86 FR 63082 (Nov. 15, 2021). 

8 15 U.S.C. 78s(b)(2). 

9See supra note 3. 

10 15 U.S.C. 78s(b)(2). 

11 17 CFR 200.30–3(a)(57). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See infra note 9 and accompanying text. 

4See Exchange Act Release No. 92225 (June 22, 

2021), 86 FR 34084 (June 28, 2021) (File No. SR– 

FINRA–2021–016) (‘‘Notice’’). 

5See letter from Jeanette Wingler, Associate 

General Counsel, FINRA, to Lourdes Gonzalez, 

Assistant Chief Counsel—Sales Practices, Division 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–NYSE–2022–02 and should 

be submitted on or before February 22, 

2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–01842 Filed 1–28–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94054; File No. SR– 

NYSEArca–2021–53] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Designation of a 

Longer Period for Commission Action 

on Proceedings To Determine Whether 

To Approve or Disapprove a Proposed 

Rule Change To List and Trade Shares 

of the Teucrium Bitcoin Futures Fund 

Under NYSE Arca Rule 8.200–E, 

Commentary .02 (Trust Issued 

Receipts) 

January 25, 2022. 

On July 23, 2021, NYSE Arca, Inc. 

(‘‘NYSE Arca’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

list and trade shares of the Teucrium 

Bitcoin Futures Fund under NYSE Arca 

Rule 8.200–E, Commentary .02 (Trust 

Issued Receipts). The proposed rule 

change was published for comment in 

the Federal Register on August 11, 

2021.3

On September 15, 2021, pursuant to 

Section 19(b)(2) of the Act,4 the 

Commission designated a longer period 

within which to approve the proposed 

rule change, disapprove the proposed 

rule change, or institute proceedings to 

determine whether to disapprove the 

proposed rule change.5 On November 8, 

2021, the Commission instituted 

proceedings under Section 19(b)(2)(B) of 

the Act 6 to determine whether to 

approve or disapprove the proposed 

rule change.7

Section 19(b)(2) of the Act 8 provides 

that, after initiating proceedings, the 

Commission shall issue an order 

approving or disapproving the proposed 

rule change not later than 180 days after 

the date of publication of notice of filing 

of the proposed rule change. The 

Commission may extend the period for 

issuing an order approving or 

disapproving the proposed rule change, 

however, by not more than 60 days if 

the Commission determines that a 

longer period is appropriate and 

publishes the reasons for such 

determination. The proposed rule 

change was published for comment in 

the Federal Register on August 11, 

2021.9 The 180th day after publication 

of the proposed rule change is February 

7, 2022. The Commission is extending 

the time period for approving or 

disapproving the proposed rule change 

for an additional 60 days. 

The Commission finds that it is 

appropriate to designate a longer period 

within which to issue an order 

approving or disapproving the proposed 

rule change so that it has sufficient time 

to consider the proposed rule change 

and the issues raised in the comments 

that have been submitted in connection 

therewith. Accordingly, the 

Commission, pursuant to Section 

19(b)(2) of the Act,10 designates April 8, 

2022, as the date by which the 

Commission shall either approve or 

disapprove the proposed rule change 

(File No. SR–NYSEArca–2021–53). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–01854 Filed 1–28–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94061; File No. SR–FINRA– 

2021–016] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Approving a 

Proposed Rule Change To Amend Rule 

2165 (Financial Exploitation of 

Specified Adults) 

January 25, 2022. 

I. Introduction 

On June 9, 2021, the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) filed with the Securities and 

Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Exchange Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to amend FINRA Rule 2165 

(Financial Exploitation of Specified 

Adults) to: (1) Permit member firms to 

place a temporary hold on a securities 

transaction, subject to the same terms 

and restrictions applicable to a 

temporary hold on disbursements of 

funds or securities (‘‘disbursements’’), 

where there is a reasonable belief of 

financial exploitation of a ‘‘specified 

adult’’ as defined in the rule; 3 (2) permit 

member firms to extend a temporary 

hold, whether on a disbursement or a 

transaction, for an additional 30 

business days, if the member firm has 

reported the matter to a state regulator 

or agency of competent jurisdiction, or 

a court of competent jurisdiction 

(hereinafter collectively referred to as a 

‘‘State Authority’’); and, (3) require 

member firms to retain records of the 

reason and support for any extension of 

any temporary hold, including 

information regarding any 

communications with, or by, a State 

Authority. 

The proposed rule change was 

published for comment in the Federal 

Register on June 28, 2021.4 On July 20, 

2021, FINRA consented to extend until 

September 24, 2021, the time period in 

which the Commission must approve 

the proposed rule change, disapprove 

the proposed rule change, or institute 

proceedings to determine whether to 

approve or disapprove the proposed 

rule change.5 On August 23, 2021, 


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of Trading and Markets, Commission, dated July 20, 

2021, available at https://www.finra.org/sites/ 

default/files/2021-07/SR-FINRA-2021-016- 

Extension1.pdf. 

6See letter from Jeanette Wingler, Associate 

General Counsel, FINRA, to Vanessa Countryman, 

Secretary, Commission, dated August 23, 2021 

(‘‘FINRA Response Letter 1’’), available at https:// 

www.sec.gov/comments/sr-finra-2021-016/ 

srfinra2021016-9160159-247786.pdf. 

7See Exchange Act Release No. 93103 (September 

22, 2021) 86 FR 53696 (September 28, 2021) (File 

No. SR–FINRA–2021–016) (‘‘OIP’’). 

8See letter from Jeanette Wingler, Associate 

General Counsel, FINRA, to Vanessa Countryman, 

Secretary, Commission, dated November 2, 2021 

(‘‘FINRA Response Letter 2’’), available at https:// 

www.sec.gov/comments/sr-finra-2021-016/ 

srfinra2021016-9363745-261806.pdf. 

9See letter from Jeanette Wingler, Associate 

General Counsel, FINRA, to Lourdes Gonzalez, 

Assistant Chief Counsel—Sales Practices, Division 

of Trading and Markets, Commission, dated 

December 6, 2021, available at https://

www.finra.org/sites/default/files/2021-12/sr-finra2021-016-extension2.pdf. 

10See Rule 2165(a)(1). Supplementary Material 

.03 to Rule 2165 provides that a member firm’s 

reasonable belief that a natural person age 18 and 

older has a mental or physical impairment that 

renders the individual unable to protect their own 

interests may be based on the facts and 

circumstances observed in the member firm’s 

business relationship with the person. See Notice 

at 34086 n.17. 

11See Notice at 34086. For example, according to 

FINRA member firms have placed temporary holds 

to prevent senior investors from losing: (1) $200,000 

(representing approximately two-thirds of the 

investor’s account) related to a Central Intelligence 

Agency lawsuit scam; (2) $10,000 in a lottery scam; 

(3) $60,000 in a romance scam; and (4) $50,000 to 

financial exploitation by a brother-in-law. Id. 

12See Notice at 34086. 

13See Rule 2165(b)(1)(B). 

14See Rule 2165(b)(1)(C). 

15See Rules 3110, 3120, 3130, 3150, and the Rule 

4510 Series. 

16See Rule 2165(c)(1). 

17See Rule 2165(c)(2). 

18See Supplementary Material .02 to Rule 2165. 

19See Rule 2165(d). 

20See Notice at 34086. 

21See Notice at 34088. 

22According to FINRA, the retrospective review 

process had two phases: (1) The assessment phase 

and (2) the action phase. FINRA stated that during 

the assessment phase, it first sought comment via 

Regulatory Notice 19–27 (August 2019) on several 

questions with respect to addressing financial 

exploitation and other circumstances of financial 

vulnerability for senior investors. The assessment 

phase of this review included discussions during 

member exams in 2019 that focused on Rule 2165, 

as well as a survey of FINRA members on these 

issues. In addition, FINRA obtained input from 

several advisory committees comprising member 

firms of different sizes and business models, 

investor protection advocates, member firms, and 

trade associations. FINRA stated that it also 

obtained the perspective of its operating 

departments that help administer Rule 2165, and 

considered examination observations and findings 

involving senior issues. Finally, FINRA stated that 

it also developed an anonymous survey that was 

distributed to all member firms in the first quarter 

of 2020. See Notice at 34085. 

23See Notice at 34087. 

24See proposed Rule 2165(b). 

FINRA responded to the comment 

letters received in response to the 

Notice.6 On September 22, 2021, the 

Commission filed an Order Instituting 

Proceedings (‘‘OIP’’) to determine 

whether to approve or disapprove the 

proposed rule change.7 On November 2, 

2021, FINRA responded to the comment 

letters received in response to the OIP.8

On December 6, 2021, FINRA consented 

to extend until February 23, 2022 the 

time period in which the Commission 

must approve or disapprove the 

proposed rule change.9 This order 

approves the proposed rule change. 

II. Description of the Proposed Rule 

Change 

A. Background 

FINRA’s proposed rule change would 

amend Rule 2165, which currently 

permits a member firm to place a 

temporary hold on a disbursement from 

the account of a ‘‘specified adult’’ 

customer for up to 25 business days if 

the criteria of the rule are satisfied. A 

‘‘specified adult’’ is someone either age 

65 and older, or age 18 and older if the 

member firm reasonably believes that a 

mental or physical impairment has 

rendered the person incapable of 

protecting their own interests.10

According to FINRA, temporary holds 

on disbursements have played a 

significant role in providing member 

firms with a way to respond promptly 

to suspicions of customer financial 

exploitation before a customer 

experiences potentially significant 

losses.11

A member firm’s ability to place a 

temporary hold on disbursements is 

subject to a number of conditions that 

are designed to help prevent 

misapplication of the rule.12 The 

safeguards include requiring that 

member firms provide notification of 

both the hold, and the reason for the 

hold, to all parties authorized to transact 

business on the customer’s account, 

including the customer and any trusted 

contact person of the customer, no later 

than two business days after the day on 

which the firm first placed the hold.13

In addition, after placing the hold the 

member firm must immediately initiate 

an internal review of the facts and 

circumstances that caused the firm to 

reasonably believe that the financial 

exploitation of the specified adult has 

occurred, is occurring, has been 

attempted, or will be attempted.14

Furthermore, the general supervisory 

and recordkeeping requirements of 

certain FINRA Rules 15 require a 

member firm relying on Rule 2165 to 

establish and maintain written 

supervisory procedures that are 

reasonably designed to achieve 

compliance with the rule, including, but 

not limited to, procedures related to the 

identification, escalation, and reporting 

of matters related to the financial 

exploitation of specified adults.16 With 

respect to associated persons who may 

be handling the customer’s account, 

Rule 2165 also requires that any request 

for a hold be escalated to a supervisor, 

compliance department or legal 

department rather than allowing the 

associated person to independently 

place a hold.17 In addition, a member 

firm relying on the rule is required to 

develop and document training policies 

or programs reasonably designed to 

ensure that such associated persons 

comply with the requirements of the 

rule,18 as well as retain records related 

to compliance with the rule, which 

must be made readily available to 

FINRA upon request.19 With respect to 

the specific disbursements on which a 

hold may be placed, temporary holds 

pursuant to Rule 2165 may only be 

placed where the member has a 

reasonable belief of customer financial 

exploitation—for example, a customer 

payment related to a commonly known 

scam, such as a lottery scam.20 Each of 

these safeguards incorporated into Rule 

2165 would apply equally to the 

proposed rule change permitting 

temporary holds on securities 

transactions.21

In August 2019, FINRA commenced a 

retrospective review to assess the 

effectiveness and efficiency of its rules 

and administrative processes designed 

to protect senior investors from 

financial exploitation, including Rule 

2165.22 FINRA stated that information 

gathered during the review supported 

the need for firms to have additional 

time to resolve matters arising from 

suspected financial exploitation, as well 

as extending the rule to allow firms to 

place securities transaction holds.23

The proposed rule change would 

expand upon Rule 2165 in both scope 

and temporal reach by: (1) Expanding 

the scope of Rule 2165(b)(1) by 

permitting member firms to place a 

temporary hold on a securities 

transaction, in addition to the alreadypermitted hold on disbursements, where 

the conditions of the rule, including the 

member’s reasonable belief of customer 

financial exploitation, are met; 24 (2) 

permitting member firms to extend the 

maximum time period for any 

temporary hold initiated pursuant to 

Rule 2165(b)(1) for an additional 30 

business days, beyond the current 

maximum of 25 business days, if the 

firm has reported the matter to a State 


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25See proposed Rule 2165(b)(4). 

26See proposed Rule 2165(d). 

27See Notice at 34087. 

28See Rule 2165(b). 

29For example, FINRA stated that Rule 2165 

currently would not apply to a customer’s order to 

sell his shares of a stock. However, FINRA 

elaborated that if a customer requested that the 

proceeds of a sale of shares of a stock be disbursed 

out of his or her account at the member firm, then 

the rule could apply to the disbursement of the 

proceeds where the customer is a ‘‘specified adult’’ 

and there is reasonable belief of financial 

exploitation. See Notice at 34087 at n.33. 

30See Notice at 34087. For example, according to 

FINRA such customers may be subject to adverse 

tax consequences, early withdrawal penalties (such 

as surrender charges), or the inability to regain 

access to a sold investment that was subsequently 

closed to new investors. Id. 

31See proposed Rule 2165(b). 

32FINRA stated that Rule 2165 provides member 

firms and their associated persons with a safe 

harbor from FINRA Rules 2010 (Standards of 

Commercial Honor and Principles of Trade), 2150 

(Improper Use of Customers’ Securities or Funds; 

Prohibition Against Guarantees and Sharing in 

Accounts) and 11870 (Customer Account Transfer 

Contracts) when member firms exercise discretion 

in placing temporary holds on disbursements of 

funds or securities from the accounts of specified 

adults consistent with the requirements of Rule 

2165. See Notice at 34086. 

33See supra notes 11–20 and accompanying 

language. 

34See Notice at 34086. 

35See Rule 2165(b)(2). 

36See Rule 2165(b)(3). 

37See Notice at 34088, 34092. 

38See id. 

39 Id. 

40See proposed Rule 2165(b)(4). FINRA stated 

that the 30-business-day-hold period in proposed 

Rule 2165(b)(4) would be in addition to the 15- 

business-day-hold period in Rule 2165(b)(2) and the 

10-business-day-hold period in Rule 2165(b)(3). See 

Notice at 34087 n.31. 

41See proposed Rule 2165(d)(6). 

42 In approving this rule change, the Commission 

has considered the rule’s impact on efficiency, 

competition, and capital formation. See 15 U.S.C. 

78c(f). 

43 15 U.S.C. 78o–3(b)(6). 

Authority; 25 and (3) requiring member 

firms to retain records of the reason and 

support for any extension of a 

temporary hold, including information 

regarding any communications with, or 

by, a State Authority.26 According to 

FINRA, the proposed rule change is 

designed to protect investors and the 

public interest by strengthening the 

tools available to FINRA’s member firms 

to combat the financial exploitation of 

vulnerable investors, which presents the 

potential for significant and 

longstanding harm to those investors.27

B. Proposed Rule Change 

1. Proposed Temporary Hold on 

Securities Transactions in the Account 

of a Specified Adult (Proposed Rule 

2165(b)) 

Rule 2165 currently permits member 

firms to place temporary holds on 

disbursements of funds or securities 

when the firm has a reasonable belief 

that the customer is being financially 

exploited.28 Although this serves to stop 

funds or securities from leaving a 

customer’s account, FINRA indicated 

that a hold on disbursements may be 

insufficient to protect certain investors 

from financial exploitation with respect 

to their securities transactions.29

Specifically, FINRA believes that even if 

a temporary hold is placed on the 

resulting disbursement out of a 

customer’s account, the execution of the 

transaction may still subject the 

customer to significant, negative 

financial consequences.30

Accordingly, FINRA is proposing to 

amend Rule 2165 to permit firms to 

place a temporary hold on securities 

transactions when the firm has a 

reasonable belief that the customer is 

being financially exploited.31 In 

accordance with the rule’s current safe 

harbors for holds on disbursements,32

the proposed rule change would permit, 

but not require, firms to place a hold on 

transactions in these circumstances. 

FINRA believes that the safeguards in 

Rule 2165 33 would help prevent 

misapplication of the rule with respect 

to temporary holds on disbursements, 

and would apply equally to temporary 

holds on transactions.34

2. Proposed 30-Day Extension of the 

Temporary Hold Period (Proposed Rule 

2165(b)(4)) 

Rule 2165 currently allows a member 

firm to place a temporary disbursement 

hold on a specified adult customer’s 

account for up to 15 business days if the 

specified conditions required by the 

rule are satisfied, unless otherwise 

terminated or extended by a State 

Authority.35 The member firm may 

extend that hold for an additional 10 

business days, for a maximum of 25 

business days total, if the member firm’s 

internal review of the facts and 

circumstances supports its reasonable 

belief that the financial exploitation of 

the specified adult has occurred, is 

occurring, has been attempted or will be 

attempted, unless otherwise terminated 

or extended by a State Authority.36

FINRA stated that although some 

matters can be quickly resolved after 

placing a temporary hold (e.g., by 

explaining to the customer that the 

activity and requested disbursement fit 

a commonly-known scam), other 

matters are more complex and may 

require additional time.37 For example, 

a more complex matter like suspected 

financial exploitation of an elderly 

customer by a family member or 

caregiver may entail investigations by 

state regulators or agencies, or legal 

actions in a court, and thus may require 

additional time for firms to resolve since 

both the firm and the other parties 

investigating the matter need time to 

gather and share information.38 In 

particular, FINRA stated that the 

average duration of an investigation for 

matters reported to the federal National 

Adult Maltreatment Reporting System 

(NAMRS) is 52.6 days.39

Accordingly, FINRA is proposing to 

amend Rule 2165 to permit firms to 

extend any temporary hold (of a 

securities transaction or disbursement) 

under the rule for an additional 30 

business days provided that: (1) The 

member firm’s internal review of the 

facts and circumstances supports the 

firm’s reasonable belief that financial 

exploitation of the specified adult has 

occurred, is occurring, has been 

attempted, or will be attempted, and (2) 

the member firm has reported or 

provided notification of its reasonable 

belief to a State Authority.40 Thus, firms 

would be able to extend a transaction or 

disbursement hold up to a maximum of 

55 business days only in instances 

where they have externally reported the 

suspicious conduct. 

3. Proposed Addition To Record 

Retention (Proposed Rule 2165(d)) 

Rule 2165(d) currently requires 

member firms to retain records related 

to compliance with the rule, which 

must be readily available to FINRA 

upon request. To evidence compliance 

with Rule 2165 in placing or extending 

a temporary hold (of a securities 

transaction or disbursement), FINRA is 

proposing to amend Rule 2165(d) to 

require that a member firm retain 

records of the reason and support for 

any extension of a temporary hold, 

including information regarding any 

communications with, or by, a State 

Authority.41

III. Discussion and Commission 

Findings 

After careful review of the proposed 

rule change, the comment letters, and 

FINRA’s responses to the comments, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Exchange Act and 

the rules and regulations thereunder 

that are applicable to a national 

securities association.42 Specifically, the 

Commission finds that the proposed 

rule change is consistent with Section 

15A(b)(6) of the Exchange Act,43 which 

requires, among other things, that 

FINRA rules be designed to prevent 


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44See letter to Vanessa Countryman, Secretary, 

Commission, from William A. Jacobson, Esq., 

Clinical Professor of Law and Director of Cornell 

Securities Law Clinic, Cornell University Law 

School, dated October 13, 2021 (‘‘Cornell Clinic 

Letter’’); letter to Vanessa Countryman, Secretary, 

Commission, from William Benson, National Policy 

Adviser, and Kendra Kuehn, National Policy 

Analyst, National Adult Protective Services 

Association (‘‘NAPSA’’), dated July 29, 2021 

(‘‘NAPSA Letter’’); letter to Vanessa Countryman, 

Secretary, Commission, from Lisa Bleier and Marin 

Gibson, Securities Industry and Financial Markets 

Association (‘‘SIFMA’’), dated July 28, 2021 

(‘‘SIFMA Letter’’); letter to Vanessa Countryman, 

Secretary, Commission, from Christine Lazaro, 

Director of the Securities Arbitration Clinic and, 

Professor of Clinical Legal Education, St. John’s 

University (the ‘‘St. John’s Clinic’’), dated July 19, 

2021 (‘‘St. John’s Clinic Letter’’); letter to Vanessa 

Countryman, Secretary, Commission, from 

Eversheds Sutherland (US) LLP on behalf of the 

Committee of Annuity Insurers (‘‘CAI’’), dated July 

19, 2021 (‘‘CAI Letter’’); letter to Vanessa 

Countryman, Secretary, Commission, from Ron 

Long, Head of Aging Client Services, Wells Fargo 

(‘‘Wells Fargo’’), dated July 15, 2021 (‘‘Wells Fargo 

Letter’’). 

45See CAI Letter at 2; NAPSA Letter at 1. 

46CAI Letter at 2. 

47See Cornell Clinic Letter at 2–3. 

48 Id. at 1. 

49St. John’s Clinic Letter at 2. 

50 Id. 

51 Id. 

52See FINRA Response Letter 1 at 4. 

53 Id. 

54 Id. 

55See CAI Letter; NAPSA Letter; SIFMA Letter. 

56See NAPSA Letter at 1. 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, and, in general, to 

protect investors and the public interest. 

A. Temporary Holds on Securities 

Transactions in the Account of a 

Specified Adult (Proposed Rule 2165(b)) 

The proposed rule change would 

amend Rule 2165 to permit firms to 

place a temporary hold on securities 

transactions when the firm has a 

reasonable belief that the customer is 

being financially exploited. 

All commenters generally supported 

this aspect of the proposal.44 For 

example, commenters asserted that 

extending Rule 2165 to cover securities 

transactions would provide additional 

tools that firms could use to protect 

senior investors from financial 

exploitation and its detrimental 

consequences.45 One of these 

commenters further stated that the 

proposed rule change would ‘‘provide 

more clarity on the manner in which 

member firms can attempt to combat 

financial exploitation with respect to 

direct held securities products, such as 

variable annuities, that are not usually 

held in a brokerage account that has a 

disbursement [feature].’’ 46 Another 

commenter stated that expanding the 

rule to include temporary holds on 

transactions would allow member firms 

to protect their customers to a greater 

degree, noting that customers may be 

financially exploited with regard to 

transactions just as they are with 

disbursements, and additionally 

member firms are in the best position to 

identify common characteristics of 

scams and exploitation and to recognize 

red flags in individual customers’ 

accounts.47 This commenter further 

stated that ‘‘[c]onsistent with this state 

law trend, FINRA’s proposal to now 

include temporary holds on securities 

transactions within 2165 will help 

protect against financial exploitation 

relating to purchases or sales, and thus 

protect senior investors from significant 

harm.’’ 48

One commenter suggested that 

notwithstanding its general support for 

the proposed rule change as drafted, 

‘‘more may be done to further protect 

senior investors’’ and requested that 

‘‘FINRA further consider making the 

Rule proscriptive rather than 

permissive.’’ 49 In particular, this 

commenter stated that ‘‘small and midsized firms have declined to utilize the 

safe harbor offered by Rule 2165 

because of concerns associated with 

litigation risks,’’ 50 and that investors 

‘‘would benefit from a uniform national 

standard of mandated reporting where 

financial exploitation is suspected, even 

if placing a hold is not mandated.’’ 51

In response, FINRA stated that 

permitting a member firm to use 

discretion in placing a temporary hold 

would allow for the judicious use of 

temporary holds to protect customers 

from financial exploitation.52 FINRA 

stated that some states mandate 

reporting of suspected financial 

exploitation by financial institutions, 

including broker-dealers, within a 

specified period of time, and FINRA 

expects member firms to comply with 

all applicable state requirements, 

including reporting requirements.53

FINRA further stated that where state 

reporting is not required, mandatory 

reporting of every temporary hold 

pursuant to Rule 2165 could lead to an 

inefficient or ineffective use of time and 

resources for state regulators and 

agencies, particularly where firms were 

able to quickly resolve matters by 

engaging a customer’s trusted contact 

person or using other tools.54 For these 

reasons, FINRA declined amending the 

proposed rule change. 

Permitting firms to impose a 

temporary hold on transactions where 

appropriate, in addition to the authority 

firms already have to impose temporary 

holds on disbursements, would provide 

an additional measure of protection to 

customers from the harmful impact of 

exploitative transactions, such as 

adverse tax consequences, early 

withdrawal penalties, or investing in 

securities that do not align with their 

investor profiles. A temporary hold on 

disbursements may not be sufficient to 

prevent or redress customer harm from 

financial exploitation in certain 

instances, such as financial exploitation 

involving the purchase and sale of 

securities. Therefore, authorizing firms 

to place temporary holds on securities 

transactions represents an important 

mechanism to help firms prevent 

harmful financial consequences that 

could result from a customer being 

subject to an exploitative securities 

transaction. Moreover, FINRA’s 

approach, which balances the 

importance of reporting against the risk 

of an inefficient or ineffective use of 

time and resources for state regulators 

and agencies, is reasonable. In addition, 

the Commission expects firms to 

comply with applicable state laws 

mandating that firms report suspected 

financial exploitation. For these reasons, 

the Commission finds the proposed rule 

change is consistent with the protection 

of investors and in the public interest. 

B. Proposed 30-Day Extension of the 

Temporary Hold Period (Proposed Rule 

2165(b)(4)) 

The proposed rule change would 

permit firms to extend the temporary 

hold on disbursements or transactions 

authorized by this rule for an additional 

30 business days where the member 

firm has reported or provided 

notification of the member’s reasonable 

belief of financial exploitation of a 

specified adult to a State Authority. 

Several commenters suggested that 

more time is needed for the 

investigation of senior financial 

exploitation cases.55 One commenter 

stated that compared to the average 52.6 

day duration of an investigation for all 

cases reported to NAMRS, ‘‘financial 

exploitation investigations are often 

more complicated and time consuming’’ 

and thus the commenter recommended 

that the 30-business-day extension be 

treated only as a starting point, which 

could be revisited as more data become 

available.56 Another commenter stated 

that data show ‘‘there will still be a 

sizeable percentage of cases of potential 

financial exploitation that are not 

resolved in a timely manner, even with 

the 30-business day extension . . . so 

firms will still be in the unenviable 

position of determining whether to 

engage in the disbursement, or execute 

the securities transaction, prior to their 


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57CAI Letter at 2–3. 

58 Id. at 2. 

59 Id. at 3. 

60See FINRA Response Letter 1 at 3. 

61 Id. 

62 Id. 

63See FINRA Response Letter 1 at 3–4. 

64See Rule 2165(b)(3). 

65See Proposed Rule 2165(b)(4). 

66See Cornell Clinic Letter at 3. 

67 Id. 

68 Id. 69See FINRA Response Letter 2 at 2–3. 70See id. at 2. 71See id. at 3. 72See id. 73 Id. 74Cornell Clinic Letter at 3. 75See id. 

76See FINRA Response Letter 2 at 3. 

77 Id. 

78 Id. 

79 Id. 

80See supra notes 21 and 37–39 and 

accompanying text. 

ability to conclude the investigation and 

ensure that the customer has not been 

exploited.’’ 57 In addition, a commenter 

stated that because ‘‘[s]tate laws do not 

conform to the additional 30-business 

days granted under’’ the proposed rule 

change ‘‘firms will be forced to continue 

to wade through a patchwork of 

requirements.’’ 58 Therefore, this 

commenter recommended that FINRA 

work with state agencies and the courts 

to foster consistency with respect to the 

permitted timeframe, as well as review 

the timeline again in the future to assess 

its efficacy.59

In response, FINRA stated that the 

proposed rule change strikes a 

reasonable balance between giving 

member firms adequate time to 

investigate and contact the relevant 

parties, as well as to seek input from a 

State Authority if needed, while 

prohibiting an open-ended hold 

period.60 FINRA emphasized that Rule 

2165 already permits a temporary hold 

to be terminated or extended by a State 

Authority.61 Furthermore, FINRA stated 

that it has met, and will continue to 

meet, with adult protective services 

(‘‘APS’’) staff in multiple states and 

NAPSA to increase the coordination of 

senior investor protection efforts and 

highlight Rule 2165’s provision that 

APS has the ability to direct a member 

firm to terminate or extend a temporary 

hold authorized by the Rule.62 In 

addition, FINRA asserted that if the 

proposed hold period does not provide 

member firms with adequate time for 

investigation, FINRA may consider 

extending the temporary hold period in 

future rulemaking.63

Another commenter opposed the 

proposed extension of the temporary 

hold period because the basis for 

whether to exercise the 10-business-day 

extension currently permitted by the 

rule 64 and the proposed 30-businessday extension 65 would use different 

standards.66 The commenter 

recommended that FINRA amend the 

proposed rule change to require that the 

basis for exercising both extensions 

require that an internal investigation 

support a reasonable belief in financial 

exploitation (the current standard for 

the 10-business-day extension).67 The 

commenter also suggested that FINRA 

consolidate the two extensions into a 

single 40-business-day extension.68

In response, FINRA stated that, as 

with the 10-business-day extension 

currently provided under Rule 

2165(b)(3), the 30-business-day 

extension would require that the 

member firm’s internal review of the 

facts and circumstances support a 

reasonable belief of the existence of, or 

potential for, financial exploitation 

necessitating the temporary hold.69

However, the additional 30-businessday extension also would require the 

firm to report or notify a State 

Authority.70 The additional 30 business 

days would provide firms with 

additional time to resolve complex 

matters, often involving investigations 

by state regulators or agencies or legal 

actions in a court.71 FINRA stated that 

it does not support consolidating the 

two extensions of the temporary hold 

into a single 40-business day extension 

because doing so would not differentiate 

between matters of varying 

complexity.72 FINRA stated that the 

proposed rule change strikes a 

reasonable balance in giving member 

firms adequate time to investigate and 

contact the relevant parties, as well as 

seek input from a state regulator or 

agency or a court if needed.73

The commenter also opposed the 

proposed 30-business-day extension 

because ‘‘a non-overridable limit on 

customers’ ability to transact and 

disburse, even though temporary, 

unduly limits the customers autonomy, 

which does not strike the right balance 

of interests under the Exchange Act.’’ 74

Accordingly, the commenter 

recommended that FINRA provide a 

mechanism for customers to override 

the temporary hold in limited 

circumstances, since customers may be 

aware of the risks and choose to proceed 

nonetheless.75

In response, FINRA stated that 

customers are given opportunities to 

help resolve any circumstance giving 

rise to a temporary hold. For instance, 

FINRA stated that unless a member firm 

reasonably believes that doing so would 

cause further harm to a specified adult, 

FINRA encourages the firm to attempt to 

resolve the matter with a customer 

before placing a temporary hold.76 In 

addition, FINRA stated that Rule 

2165(b)(1)(B)(i) requires that, not later 

than two days after placing a temporary 

hold, the firm notify all persons 

authorized to transact business on the 

account, including the customer.77

FINRA stated, however, that allowing a 

customer to ‘‘override a temporary hold 

when the member firm has a reasonable 

belief that the customer is being 

financially exploited would give a 

powerful tool to the person exploiting 

the customer and deprive the member 

firm of a tool to address the 

exploitation.’’ 78 For example, the 

exploiter could direct the customer to 

override the hold so that the exploiter 

could access the customer’s funds.79 For 

these reasons, FINRA declined 

amending the proposed rule change. 

Providing firms with the ability to 

extend the temporary hold period from 

a maximum of 25 business days to 55 

business days reasonably aligns with 

FINRA’s stated purpose of providing 

firms with additional time to resolve 

financial exploitation matters where 

circumstances warrant. FINRA has 

found that the average duration of an 

investigation for matters reported to 

NAMRS is 52.6 days, and the proposed 

rule change would extend the potential 

maximum duration of the hold to 55 

business days—a sum that is more in 

line with the average amount of time 

needed to conduct an investigation. As 

FINRA noted, firms as well as the 

government or law enforcement entities 

that investigate suspected financial 

exploitation often need additional time 

to collect and share information in order 

to bring the investigation to 

resolution.80 But if a State Authority 

determines that additional time is 

needed the proposed rule change 

permits it to further extend the 

temporary hold. Moreover, it is 

reasonable to condition a firm’s ability 

to extend the temporary hold for an 

additional 30 business days on the firm 

reporting the matter to a State 

Authority, given that the extension is a 

serious step for both the firm and 

affected customer. These additional 

requirements, combined with the 

existing safeguards incorporated into 

Rule 2165, should provide firms with an 

effective mechanism to obtain 

additional time that may be necessary to 

resolve suspected financial exploitation 

of specified adults. 

Furthermore, allowing a customer to 

override a temporary hold when the 

firm has a reasonable belief that the 

customer is being financially exploited 


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Federal Register / Vol. 87, No. 20 / Monday, January 31, 2022 / Notices 4979 

81Cornell Clinic Letter at 4. 

82See id. 

83See Wells Letter at 2. 

84See FINRA Response Letter 1 at 5. 

85 Id. 

86See FINRA Response Letter 1 at 5. 

87NAPSA Letter at 1. 

88See FINRA Response Letter 1 at 2. FINRA 

stated that Division of Investment Management staff 

issued a no-action letter in 2018 to the Investment 

Company Institute permitting mutual fund transfer 

agents to protect specified adult shareholders from 

financial exploitation to the same extent that 

broker-dealers may do so currently under FINRA 

Rule 2165. Specifically, the no-action letter stated 

that the staff would not recommend enforcement 

action if, consistent with the conditions in the 

letter, a transfer agent, acting on behalf of a mutual 

fund, temporarily delayed for more than seven days 

the disbursement of redemption proceeds from the 

mutual fund account of a specified adult held 

directly with the transfer agent based on a 

reasonable belief that financial exploitation of the 

specified adult has occurred, is occurring, has been 

attempted, or will be attempted. See also 

Investment Company Institute, SEC No-Action 

Letter (June 1, 2018). 

89See letter from Jeanette Wingler, Associate 

General Counsel, FINRA, to Vanessa Countryman, 

Secretary, Commission, dated January 24, 2022, 

available at https://www.sec.gov/comments/srfinra-2021-016/srfinra2021016-20112614- 

265430.pdf. See also Notice of Filing of Partial 

Amendment No. 1 and Order Granting Accelerated 

Approval of File No. SR–FINRA–2016–039, 

Securities Exchange Act Release No. 79964 

(February 3, 2017), 82 FR 10059, 10066 (February 

9, 2017). 

90See FINRA Rule 0160(d)(10) and Article III, 

Section 1(a) of the FINRA Bylaws. 

could potentially serve to aid the person 

who is exploiting the customer, while 

also potentially diminishing the 

effectiveness of the firm’s means to 

address the exploitation. At the same 

time, a maximum hold time of no more 

than 55 business days, combined with 

other safeguards, would provide a 

reasonable upper limit on holds that 

serves to protect customers from being 

subject to unduly lengthy or even 

indefinite holds on transactions or 

disbursements. For these reasons, the 

Commission finds that the proposed 30- 

day extension of the temporary hold 

period is consistent with the protection 

of investors and in the public interests. 

C. Record Retention (Rule 2165(d)) 

The proposed rule change would also 

extend Rule 2165’s record retention 

obligation to temporary hold extensions 

by requiring firms to retain records of 

the reason and support for any 

extension of a temporary hold, 

including information regarding any 

communications with, or by, a State 

Authority—so that firms have a means 

to demonstrate compliance with the rule 

upon request by FINRA. 

One commenter stated that retaining 

records that justify a reasonable belief of 

financial exploitation would help 

‘‘justify the imposition of a protective 

temporary hold, justify limiting a 

customer’s autonomy, justify the 

member firm’s decision-making process, 

and ensure member firms do not feel 

free to impose unnecessary holds.’’ 81

For these reasons, the commenter stated 

that the proposed record retention 

requirement would benefit member 

firms, customers and the public.82

FINRA’s determination to require 

firms to maintain records evidencing 

those communications so that they can 

demonstrate compliance with the rule 

upon FINRA’s request, as set forth in the 

proposed rule change, is reasonable. For 

these reasons, the Commission finds 

FINRA’s proposed rule change is 

consistent with the protection of 

investors and in the public interest. 

D. Additional Issues Raised by 

Commenters 

1. Cognitive Decline or Diminished 

Capacity 

One commenter recommended that 

FINRA consider extending the Rule 

2165 safe harbor to apply where there is 

a reasonable belief that the investor has 

an impairment that renders the 

individual unable to protect his or her 

own interests, irrespective of whether 

there is evidence the customer may be 

the victim of financial exploitation by a 

third party.83

In response, FINRA stated that it did 

not extend Rule 2165 to situations 

where a member firm has a reasonable 

belief that the customer has cognitive 

decline or diminished capacity, but 

there is no evidence of financial 

exploitation because such an extension 

would give member firms too much 

discretion or would unfairly impede 

customer autonomy.84 FINRA also 

stated that member firms are not wellpositioned to determine if a customer is 

suffering from cognitive decline or 

diminished capacity.85 However, FINRA 

reminded firms of the guidance it 

provided in this area in Regulatory 

Notice 20–34 to assist member firms and 

investors address issues related to 

cognitive decline and diminished 

capacity.86

The Commission finds that expanding 

the proposed rule change to capture 

investors with cognitive decline or 

diminished capacity where there is no 

evidence of financial exploitation is 

beyond the scope of this proposed rule 

change. 

2. Investment Companies 

One commenter recommended that 

the temporary hold rules apply to 

investment companies, such as mutual 

funds, noting that because these 

companies are often the custodian of the 

actual assets, ‘‘there is nothing to be 

done to hold the actual assets if the 

client goes to them directly and 

circumvents the broker-dealer.’’ 87

In response, FINRA stated that the 

Commission, not FINRA, has 

jurisdiction over investment companies 

and their transfer agents and, in fact, has 

already addressed the commenter’s 

concern.88 Furthermore, FINRA stated 

that based on discussions with SEC staff 

regarding Section 22(e) of the 

Investment Company Act of 1940, 

FINRA does not believe that a brokerdealer’s delay of a redemption of mutual 

fund shares pursuant to its customer’s 

mutual fund redemption request, or of 

a disbursement of mutual fund 

redemption proceeds to its customer, in 

reliance on Rule 2165 as amended by 

the Proposal and based on a reasonable 

belief of financial exploitation of the 

customer would be imputed to the 

mutual fund, including where the 

broker-dealer is the fund’s principal 

underwriter.89

In general, FINRA rules apply to all 

members and persons associated with a 

member. The term ‘‘member’’ means 

any registered broker-dealer whose 

regular course of business consists in 

actually transacting securities business 

that is admitted to membership in 

FINRA.90 Therefore, the commenter’s 

recommendation is beyond the scope of 

this proposed rule change. 

In sum, for the above reasons, the 

Commission finds that the proposed 

rule change would strengthen the tools 

available to FINRA’s member firms to 

combat the financial exploitation of 

vulnerable investors. In addition, the 

Commission finds that conditioning the 

ability to extend the temporary hold by 

requiring firms to report the matter to a 

specified external authority, as well as 

requiring firms to maintain records 

evidencing those communications, 

would aid in preventing misapplication 

of the rule, and complement the existing 

safeguards already present in Rule 2165. 

Accordingly, the Commission finds that 

the proposed rule change would 

facilitate a greater measure of protection 

for investors by providing firms with 

additional means to prevent customer 

harm by imposing temporary holds on 

securities transactions where 

appropriate, and also by providing firms 

with additional time to resolve financial 

exploitation matters through extending 

the duration of a temporary hold when 

necessary. For these reasons, the 

Commission finds FINRA’s proposed 

rule change is designed to protect 

investors and the public interest. 


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4980 Federal Register / Vol. 87, No. 20 / Monday, January 31, 2022 / Notices 

91 15 U.S.C. 78s(b)(2). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 92543 

(Aug. 2, 2021), 86 FR 43289. Comments on the 

proposed rule change can be found at: https://

www.sec.gov/comments/sr-cboebzx-2021-051/ 

srcboebzx2021051.htm. 

4 15 U.S.C. 78s(b)(2). 

5See Securities Exchange Act Release No. 92989, 

86 FR 52530 (Sept. 21, 2021). The Commission 

designated November 4, 2021, as the date by which 

it should approve, disapprove, or institute 

proceedings to determine whether to disapprove the 

proposed rule change. 

6 15 U.S.C. 78s(b)(2)(B). 

7See Securities Exchange Act Release No. 93510, 

86 FR 61820 (Nov. 8, 2021). 

8See Securities Exchange Act Release No. 93822, 

86 FR 73360 (Dec. 27, 2021). 

9 15 U.S.C. 78s(b)(2). 

10See supra note 3. 

11 15 U.S.C. 78s(b)(2). 

12 17 CFR 200.30–3(a)(57). 

IV. Conclusion 

It is therefore ordered pursuant to 

Section 19(b)(2) of the Exchange Act 91

that the proposed rule change (SR– 

FINRA–2021–016) be, and hereby is, 

approved. 

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–01843 Filed 1–28–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meetings 

TIME AND DATE: Notice is hereby given, 

pursuant to the provisions of the 

Government in the Sunshine Act, Public 

Law 94–409, that the Securities and 

Exchange Commission Small Business 

Capital Formation Advisory Committee 

will hold a public meeting on Thursday, 

February 10, 2022, via videoconference. 

PLACE: The meeting will be conducted 

by remote means (videoconference) and/ 

or at the Commission’s headquarters, 

100 F Street NE, Washington, DC 20549. 

Members of the public may watch the 

webcast of the meeting on the 

Commission’s website at www.sec.gov. 

STATUS: The meeting will begin at 10:00 

a.m. (ET) and will be open to the public. 

This Sunshine Act notice is being 

issued because a majority of the 

Commission may attend the meeting. 

MATTER TO BE CONSIDERED: The agenda 

for the meeting includes matters relating 

to rules and regulations affecting small 

and emerging businesses and their 

investors under the federal securities 

laws. 

CONTACT PERSON FOR MORE INFORMATION: 

For further information and to ascertain 

what, if any, matters have been added, 

deleted or postponed; please contact 

Vanessa A. Countryman from the Office 

of the Secretary at (202) 551–5400. 

Authority: 5 U.S.C. 552b. 

Dated: January 27, 2022. 

Vanessa A. Countryman, 

Secretary. 

[FR Doc. 2022–02030 Filed 1–27–22; 4:15 pm] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94055; File No. SR– 

CboeBZX–2021–051] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Notice of 

Designation of a Longer Period for 

Commission Action on Proceedings To 

Determine Whether To Approve or 

Disapprove a Proposed Rule Change, 

as Modified by Amendment No. 1, To 

List and Trade Shares of the ARK 

21Shares Bitcoin ETF Under BZX Rule 

14.11(e)(4), Commodity-Based Trust 

Shares 

January 25, 2022. 

On July 20, 2021, Cboe BZX 

Exchange, Inc. (‘‘BZX’’ or ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

to Section 19(b)(1) of the Securities 

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to list and trade shares of the 

ARK 21Shares Bitcoin ETF under BZX 

Rule 14.11(e)(4), Commodity-Based 

Trust Shares. The proposed rule change 

was published for comment in the 

Federal Register on August 6, 2021.3

On September 15, 2021, pursuant to 

Section 19(b)(2) of the Act,4 the 

Commission designated a longer period 

within which to approve the proposed 

rule change, disapprove the proposed 

rule change, or institute proceedings to 

determine whether to disapprove the 

proposed rule change.5 On November 2, 

2021, the Commission instituted 

proceedings under Section 19(b)(2)(B) of 

the Act 6 to determine whether to 

approve or disapprove the proposed 

rule change.7 On December 9, 2021, the 

Exchange filed Amendment No. 1, 

which replaced and superseded the 

proposed rule change as originally filed. 

On December 17, 2021, the Commission 

published notice of Amendment No. 1 

to the proposed rule change.8

Section 19(b)(2) of the Act 9 provides 

that, after initiating proceedings, the 

Commission shall issue an order 

approving or disapproving the proposed 

rule change not later than 180 days after 

the date of publication of notice of filing 

of the proposed rule change. The 

Commission may extend the period for 

issuing an order approving or 

disapproving the proposed rule change, 

however, by not more than 60 days if 

the Commission determines that a 

longer period is appropriate and 

publishes the reasons for such 

determination. The proposed rule 

change was published for comment in 

the Federal Register on August 6, 

2021.10 The 180th day after publication 

of the proposed rule change is February 

2, 2022. The Commission is extending 

the time period for approving or 

disapproving the proposed rule change, 

as modified by Amendment No. 1, for 

an additional 60 days. 

The Commission finds that it is 

appropriate to designate a longer period 

within which to issue an order 

approving or disapproving the proposed 

rule change, as modified by Amendment 

No. 1, so that it has sufficient time to 

consider the proposed rule change, as 

modified by Amendment No. 1, and the 

issues raised in the comments that have 

been submitted in connection therewith. 

Accordingly, the Commission, pursuant 

to Section 19(b)(2) of the Act,11

designates April 3, 2022, as the date by 

which the Commission shall either 

approve or disapprove the proposed 

rule change, as modified by Amendment 

No. 1 (File No. SR–CboeBZX–2021– 

051). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–01845 Filed 1–28–22; 8:45 am] 

BILLING CODE 8011–01–P 


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