34084 Federal Register / Vol. 86, No. 121 / Monday, June 28, 2021 / Notices 

26 15 U.S.C. 78s(b)(2)(B). 

27 17 CFR 200.30–3(a)(12), (59). 

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

2 17 CFR 240.19b–4. 

3See 2019 Risk Monitoring and Examination 

Priorities Letter (January 2019) available at https:// 

www.finra.org/industry/2019-annual-riskmonitoring-and-examination-priorities-letter. 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

under Section 19(b)(2)(B) 26 of the Act to 

determine whether the proposed rule 

change should be approved or 

disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

NYSE–2021–36 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NYSE–2021–36. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

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–2021–36, and 

should be submitted on or before July 

19, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.27

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–13660 Filed 6–25–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meeting; Cancellation 

FEDERAL REGISTER CITATION OF PREVIOUS

ANNOUNCEMENT: 86 FR 32993, June 23, 

2021. 

PREVIOUSLY ANNOUNCED TIME AND DATE OF

THE MEETING: Thursday, June 24, 2021 at 

2:00 p.m. 

CHANGES IN THE MEETING: The Closed 

Meeting scheduled for Thursday, June 

24, 2021 at 2:00 p.m., has been 

cancelled. 

CONTACT PERSON FOR MORE INFORMATION: 

For further information; please contact 

Vanessa A. Countryman from the Office 

of the Secretary at (202) 551–5400. 

Dated: June 24, 2021. 

Vanessa A. Countryman, 

Secretary. 

[FR Doc. 2021–13813 Filed 6–24–21; 4:15 pm] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92225; File No. SR–FINRA– 

2021–016] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of a 

Proposed Rule Change To Amend Rule 

2165 (Financial Exploitation of 

Specified Adults) 

June 22, 2021. 

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

Securities Exchange Act of 1934 (‘‘Act’’ 

or ‘‘Exchange Act’’) 1 and Rule 19b–4 

thereunder,2 notice is hereby given that 

on June 9, 2021, the Financial Industry 

Regulatory Authority, Inc. (‘‘FINRA’’) 

filed with the Securities and Exchange 

Commission (‘‘SEC’’ or ‘‘Commission’’) 

the proposed rule change as described 

in Items I, II, and III below, which Items 

have been prepared by FINRA. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA is proposing to amend Rule 

2165 (Financial Exploitation of 

Specified Adults) to permit member 

firms to: (1) Extend a temporary hold on 

a disbursement of funds or securities or 

a transaction in securities for an 

additional 30-business days if the 

member firm has reported the matter to 

a state regulator or agency or a court of 

competent jurisdiction; and (2) place a 

temporary hold on a securities 

transactions where there is a reasonable 

belief of financial exploitation. 

The text of the proposed rule change 

is available on FINRA’s website at 

http://www.finra.org, at the principal 

office of FINRA and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

FINRA included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. FINRA has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Protection of Senior Investors 

The protection of senior investors is a 

top priority for FINRA. FINRA has 

prioritized protecting senior investors 

and addressed financial exploitation of 

senior investors in numerous ways, 

including: 

• Identifying senior investor issues as 

an examination priority; 3

• Launching the dedicated FINRA 

Securities Helpline for Seniors®— 

available at 844–57–HELPS—to provide 


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4See http://www.finra.org/investors/highlights/ 

finra-securities-helpline-seniors. 

5See Regulatory Notice 17–11 (March 2017). 

6See http://www.finra.org/sites/default/files/ 

senior_safe_act_factsheet.pdf. 

7See, e.g., articles such as Protecting Seniors from 

Financial Exploitation; Investor Alerts such as 

Power of Attorney and Your Investments—10 Tips, 

Plan for Transition: What You Should Know About 

the Transfer of Brokerage Account Assets on Death; 

Seniors Beware: What You Should Know About 

Life Settlements; and FINRA’s Retirement web page 

for investors. 

8See, e.g., Regulatory Notice 07–43 (Sept. 2007) 

(reminding member firms of their obligations 

relating to senior investors and highlighting 

industry practices to serve these customers); 

Regulatory Notice 09–42 (July 2009) (reminding 

member firms of their obligations with variable life 

settlement activities); Regulatory Notice 11–52 

(Nov. 2011) (reminding member firms of their 

obligations regarding the supervision of associated 

persons using senior designations); Regulatory 

Notice 16–12 (Apr. 2016) (providing guidance on 

member firm responsibilities for sales of pension 

income stream products); and Regulatory Notice 

17–11 (Mar. 2017) (discussing new senior rules and 

potential financial exploitation of seniors). 

9See, e.g., John W. Cutshall, Order Accepting 

Offer of Settlement, Case ID 2014041590801 (April 

11, 2019); Steven Anthony Olejniczak, Letter of 

Acceptance, Waiver and Consent, Case ID 

2016050107901 (May 8, 2017). 

10The stakeholders who provided input during 

the assessment phase of the retrospective review are 

collectively referred to herein as the ‘‘Retrospective 

Review Stakeholders.’’ 

11See Letter from Megan Valent, Legal Intern, and 

Teresa J. Verges, Director, University of Miami 

School of Law, to Jennifer Piorko Mitchell, Office 

of the Corporate Secretary, FINRA, dated Oct. 1, 

2019; Letter from Jennifer L. Szaro, Lara May & 

Associates, LLC, and Robert L. Hamman, President, 

First Asset Financial Inc., to Jennifer Piorko 

Mitchell, Office of the Corporate Secretary, FINRA, 

dated Oct. 4, 2019; Letter from William A. Jacobson, 

Esq., Clinical Professor of Law and Director, 

Securities Law Clinic Cornell Law School, to 

Jennifer Piorko Mitchell, Office of the Corporate 

Secretary, FINRA, dated Oct. 7, 2019; Letter from 

Kathleen Quinn, Board President, National Adult 

Protective Services Association, to Jennifer Piorko 

Mitchell, Office of the Corporate Secretary, FINRA, 

dated Oct. 7, 2019; Letter from Joe Snyder, Chair, 

Philadelphia Financial Exploitation Task Force 

dated Oct. 7, 2019; Letter from Seth A. Miller, 

General Counsel, Executive Vice President, and 

Chief Risk Officer, Cambridge Investment Research, 

Inc., to Jennifer Piorko Mitchell, Office of the 

Corporate Secretary, FINRA, dated Oct. 8, 2019; 

Letter from Eric Arnold, Clifford Kirsch and Holly 

Smith of Eversheds Sutherland on behalf of the 

Committee of Annuity Insurers, to Jennifer Piorko 

Mitchell, Office of the Corporate Secretary, FINRA, 

dated Oct. 8, 2019; Letter from Christopher W. Bok, 

Director, Financial Information Forum, to Jennifer 

Piorko Mitchell, Office of the Corporate Secretary, 

FINRA, dated Oct. 8, 2019; Letter from Marc 

Fitapelli, Esq., Fitapelli Kurta, to Jennifer Piorko 

Mitchell, Office of the Corporate Secretary, FINRA, 

dated Oct. 8, 2019; Letter from Robin M. Traxler, 

Senior Vice President, Policy & Deputy General 

Counsel, Financial Services Institute, to Jennifer 

Piorko Mitchell, Office of the Corporate Secretary, 

FINRA, dated Oct. 8, 2019; Letter from Maureen K. 

Paparo, Legal Intern, Lincoln Square Legal Services, 

Inc., to Jennifer Piorko Mitchell, Office of the 

Corporate Secretary, FINRA, dated Oct. 8, 2019; 

Letter from Courtney Rogers Reid, Lead Counsel, 

Broker-Dealer and Investment Adviser Practice 

Group, MML Investors Services, LLC, to Jennifer 

Piorko Mitchell, Office of the Corporate Secretary, 

FINRA, dated Oct. 8, 2019; Letter from Christopher 

Gerold, President, NASAA, to Jennifer Piorko 

Mitchell, Office of the Corporate Secretary, FINRA, 

dated Oct. 8, 2019; Letter from Nancy Brown, 

President and Co-Chair, and Dian VanderWell, 

Opportunity Alliance Nevada, to Jennifer Piorko 

Mitchell, Office of the Corporate Secretary, FINRA, 

dated Oct. 8, 2019; Letter from Christine Lazaro, 

President, and Samuel B. Edwards, Executive Vice 

President, Public Investors Advocate Bar 

Association, to Jennifer Piorko Mitchell, Office of 

the Corporate Secretary, FINRA, dated Oct. 8, 2019; 

Letter from Lisa J. Bleier, Managing Director, 

SIFMA, dated Oct. 8, 2019; Letter from Christine 

Lazaro, Professor of Clinical Legal Education and 

Director, St. John’s University School of Law 

Securities Arbitration Clinic, to Jennifer Piorko 

Mitchell, Office of the Corporate Secretary, FINRA, 

dated Oct. 8, 2019; Letter from Alice L. Stewart, 

Director, and Rachael T. Shaw, Adjunct Professor, 

University of Pittsburgh School of Law—Securities 

Arbitration Clinic, to Jennifer Piorko Mitchell, 

Office of the Corporate Secretary, FINRA, dated Oct. 

8, 2019; Letter from Ron Long, Head of Elder Client 

Initiatives Center of Excellence, Wells Fargo & 

Company, to Jennifer Piorko Mitchell, Office of the 

Corporate Secretary, FINRA, dated Oct. 8, 2019; 

Letter from Erin K. Lineham, Associate General 

Counsel—Compliance, Raymond James & 

Associates, Inc., to Jennifer Piorko Mitchell, Office 

of the Corporate Secretary, FINRA, dated Oct. 29, 

2019; Letter from Marin E. Gibson, Managing 

Director and Associate General Counsel, SIFMA, 

dated Nov. 15, 2019; Letter from Anonymous dated 

Feb. 26, 2020. 

12See 2019 Annual Risk Monitoring and 

Examination Priorities Letter (Jan. 22, 2019). 

13See id. 

14Survey respondents were permitted to skip 

survey questions. Information in this proposed rule 

change regarding the percentage of survey 

respondents for a particular question reflects the 

percentage of respondents for that question, not the 

percentage of respondents for the survey as a whole. 

Approximately 190 responses were received for 

Continued 

senior investors and their family 

members with a supportive place to get 

assistance from specially trained FINRA 

staff related to concerns they have with 

their brokerage accounts and 

investments; 4

• Creating national standards that 

give member firms tools—including 

permitting firms to place temporary 

holds on disbursements when they have 

a reasonable belief of financial 

exploitation and requiring firms to 

request information from customers 

about a trusted contact—to address 

suspected financial exploitation of 

senior investors and other vulnerable 

adults (i.e., FINRA Rules 2165 and 4512 

(Customer Account Information)); 5

• Collaborating with the North 

American Securities Administrators 

Association (NASAA) and the SEC to 

address senior investor protection, 

including issuing a Senior Safe Act Fact 

Sheet designed to raise awareness 

among member firms, investment 

advisers and transfer agents about the 

Act and its immunity provisions; 6

• Issuing alerts and articles educating 

investors about important issues and 

highlighting risks facing senior 

investors; 7

• Conducting and funding research 

on senior investors and financial fraud, 

and engaging with national, state and 

grassroots partners to develop and 

distribute fraud prevention resources, 

educate consumers, and provide 

training for law enforcement 

professionals, victim advocates, and 

other people on the front lines of 

fighting financial fraud; 

• Issuing Regulatory Notices 

emphasizing member firms’ obligations 

to senior investors and providing 

guidance on how to fulfill those 

obligations; 8 and 

• Bringing disciplinary actions for 

misconduct against senior investors.9

Retrospective Review 

In August 2019, FINRA launched a 

retrospective review to assess the 

effectiveness and efficiency of its rules 

and administrative processes that help 

protect senior investors from financial 

exploitation. The retrospective review 

process has two phases: The assessment 

phase and the action phase.10 During 

the assessment phase, FINRA first 

sought comment in Regulatory Notice 

19–27 (August 2019) on several 

questions with respect to addressing 

financial exploitation and other 

circumstances of financial vulnerability 

for senior investors. FINRA received 22 

comment letters to Regulatory Notice 

19–27.11

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 also 

obtained the perspective of its operating 

departments that touch the rules and 

their administration. Moreover, FINRA 

considered examination observations 

and findings involving senior issues. In 

this regard, FINRA previously had 

identified as an examination priority 

reviewing member firms’ controls 

regarding Rule 2165, to the extent firms 

anticipated using the rule’s safe harbor, 

and Rule 4512’s trusted-contact 

provision.12 As part of these reviews, 

FINRA looked at whether member firms 

had clearly defined policies and 

procedures and sought information 

about firms’ early experiences with 

these provisions.13

Finally, FINRA developed an 

anonymous survey that was distributed 

to all member firms in the first quarter 

of 2020. The purpose of the survey was 

to collect information in order to 

validate the feedback received and to 

provide an additional opportunity for 

all member firms to provide their 

views.14


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each top-level (non-nested) question. Therefore, 

unless indicated otherwise, the reader can assume 

that the percentages are based on approximately 

190 responses. 

15The proposed amendments to Rule 2165 set 

forth in Regulatory Notice 20–34 are referred to 

herein as the ‘‘Notice 20–34 Proposal.’’ 

16See Securities Exchange Act Release No. 79964 

(Feb. 3, 2017), 82 FR 10059 (Feb. 9, 2017) (Notice 

of Filing of Partial Amendment No. 1 and Order 

Granting Accelerated Approval of File No. SR– 

FINRA–2016–039). 

17The definition of ‘‘specified adult’’ in Rule 

2165 covers those investors who are particularly 

susceptible to financial exploitation. A ‘‘specified 

adult’’ is (A) a natural person age 65 and older or 

(B) a natural person age 18 and older who the 

member reasonably believes has a mental or 

physical impairment that renders the individual 

unable to protect his or her own interests. See 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 his or her own interests 

may be based on the facts and circumstances 

observed in the member firm’s business 

relationship with the person. 

18See Rule 2165(b)(1)(B). 

19See Rule 2165(b)(1)(C). 

20See Rule 2165(c)(1). 

21See Rule 2165(c)(2). 

22See Supplementary Material .02 to Rule 2165. 

23See Rule 2165(d). 

24See Protecting Senior Investors 2015–2020: An 

Update on the FINRA Securities Helpline for 

Seniors, Other FINRA Initiatives and Member Firm 

Practices (Apr. 2020) (Senior Helpline Anniversary 

Report). 

25 During exams in 2019 focusing on Rule 2165, 

FINRA observed that large firms were more likely 

than small firms to place temporary holds pursuant 

to Rule 2165. Some member firms that declined to 

use the safe harbor cited litigation risks associated 

with placing temporary holds or in evaluating 

whether a customer is being financially exploited. 

This is consistent with FINRA’s survey responses 

with large firms indicating that they had placed a 

temporary hold pursuant to the rule in a 

significantly larger percentage than mid-size or 

small firms. Thirty-one survey respondents had 

placed a temporary hold pursuant to Rule 2165. 

Eighty-four percent of large firm respondents had 

placed a hold pursuant to Rule 2165, while only 6% 

of all other sized firm respondents had placed a 

hold pursuant to Rule 2165. 

The review indicated that FINRA’s 

steps to protect seniors have provided 

helpful and effective tools in the fight 

against financial exploitation, but it also 

suggested some additional tools, 

guidance and rule changes. In October 

2020, FINRA published Regulatory 

Notice 20–34 (October 2020): (1) 

Summarizing the retrospective rule 

review process, including the 

predominant themes that emerged from 

Retrospective Review Stakeholder 

feedback; (2) seeking comment on 

proposed amendments to Rule 2165 to 

further address suspected financial 

exploitation of senior investors and 

other specified adults; and (3) providing 

guidance to aid member firms and 

senior investors and other specified 

adults.15

Rule 2165 

Rule 2165 is the first uniform national 

standard for placing temporary holds on 

disbursements to address suspected 

financial exploitation.16 Rule 2165 

permits a member firm to place a 

temporary hold on a disbursement of 

funds or securities from the account of 

a ‘‘specified adult’’ 17 customer when 

the firm reasonably believes that 

financial exploitation of that adult has 

occurred, is occurring, has been 

attempted or will be attempted. Prior to 

the adoption of Rule 2165, some 

member firms expressed concern that 

placing a temporary hold on suspicious 

disbursements was not explicitly 

permitted by FINRA rules. 

To address these concerns, 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. FINRA encourages member firms 

to take advantage of the Rule 2165 safe 

harbor where there is a reasonable belief 

of customer financial exploitation. 

Rule Safeguards 

Rule 2165 also includes important 

safeguards that are designed to ensure 

that there is not a misapplication of the 

rule, including the requirements that: 

(1) A member firm provide 

notification of the hold and the reason 

for the hold to all parties authorized to 

transact business on the account, 

including the customer and the 

customer’s trusted contact person no 

later than two business days after the 

date that the member firm first placed 

the hold; 18

(2) A member firm that places a hold 

pursuant to the rule immediately 

initiate an internal review of the facts 

and circumstances that caused the 

member to reasonably believe that the 

financial exploitation of the specified 

adult has occurred, is occurring, has 

been attempted, or will be attempted; 19

(3) In addition to the general 

supervisory and recordkeeping 

requirements of FINRA Rules 3110, 

3120, 3130, 3150, and Rule 4510 Series, 

a member relying on the rule establish 

and maintain written supervisory 

procedures 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; 20

(4) Any request for a hold be escalated 

to a supervisor, compliance department 

or legal department rather than allowing 

an associated person handling an 

account to independently place a 

hold; 21

(5) A member firm relying on the rule 

develop and document training policies 

or programs reasonably designed to 

ensure that associated persons comply 

with the requirements of the rule; 22 and 

(6) A member firm relying on the rule 

retain records related to compliance 

with the rule, which shall be readily 

available to FINRA, upon request.23

Importantly, a temporary hold 

pursuant to Rule 2165 may be placed on 

a particular suspicious disbursement(s) 

(e.g., a payment related to a commonly 

known scam, such as a lottery scam) but 

not on non-suspicious disbursements 

(e.g., a regular mortgage payment or 

assisted living facility payment). 

Responding to Suspected Financial 

Exploitation 

Temporary holds on disbursements 

have played a critical role in providing 

member firms a way to quickly respond 

to suspicions of financial exploitation 

before potentially ruinous losses occur 

for the customer. For example, FINRA’s 

report for the five-year anniversary of 

the FINRA Securities Helpline for 

Seniors® highlights several matters that 

illustrate the positive impact of placing 

temporary holds on disbursements to 

address financial exploitation.24 The 

matters include temporary holds placed 

by member firms to prevent senior 

investors from losing: 

• $200,000 (representing 

approximately two-thirds of the 

investor’s account) related to a Central 

Intelligence Agency (CIA) lawsuit scam; 

• $10,000 in a lottery scam; 

• $60,000 in a romance scam; and 

• $50,000 to financial exploitation by 

a brother-in-law. 

Proposed Amendments to Rule 2165 

The retrospective review indicated 

that Rule 2165 has been an effective tool 

in the fight against financial 

exploitation,25 but supported 

amendments to permit member firms to: 

(1) Extend a temporary hold on a 

disbursement of funds or securities or a 

transaction in securities for an 

additional 30-business days if the 

member firm has reported the matter to 

a state regulator or agency or a court of 


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26See Rule 2165(b)(2). 

27See Rule 2165(b)(3). 

28See, e.g., comments to the Notice 20–34 

Proposal from CAI, Cambridge, Commonwealth, 

Edward Jones, Fidelity, FSI, IRI, Miami Investor 

Rights Clinic, MMLIS, NAPSA, Norcross, 

Philadelphia Financial Exploitation Task Force, 

SIFMA and Wells Fargo. 

29The NASAA Model Act is available at https:// 

www.nasaa.org/industry-resources/senior-issues/ 

model-act-to-protect-vulnerable-adults-fromfinancial-exploitation/. 

30 In 2019, FINRA identified as an examination 

priority: (1) Reviewing member firms’ controls 

regarding their obligations under trusted contact 

person-related amendments to FINRA Rule 4512 

and Rule 2165, to the extent that firms anticipate 

placing temporary holds on disbursements pursuant 

to the Rule 2165 safe harbor, including whether 

firms have clearly defined policies and procedures 

or practices; and (2) learning about firms’ early 

experiences with these provisions. See 2019 Annual 

Risk Monitoring and Examination Priorities Letter 

(Jan. 22, 2019). 

31The 30-business day hold period in proposed 

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

business day hold in Rule 2165(b)(2) and the 10- 

business day hold in Rule 2165(b)(3). 

32See proposed Rule 2165(d)(6). 

33For example, Rule 2165 currently would not 

apply to a customer’s order to sell his shares of a 

stock. However, if a customer requested that the 

proceeds of a sale of shares of a stock be disbursed 

out of his 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. 

34See, e.g., comments to the Notice 20–34 

Proposal from CAI, Cambridge, Commonwealth, 

Edward Jones, Fidelity, FSI, IRI, LPL, Miami 

Investor Rights Clinic, MMLIS, NAPSA, Norcross, 

Philadelphia Financial Exploitation Task Force, 

SIFMA and Wells Fargo. 

competent jurisdiction; and (2) place a 

temporary hold on a securities 

transaction where there is a reasonable 

belief of financial exploitation. 

Hold Period 

Rule 2165 currently allows a member 

firm to place a temporary hold on a 

specified adult customer’s account for 

up to 25-business days if the criteria in 

the rule are satisfied. More specifically, 

the temporary hold authorized by Rule 

2165 would expire not later than 15- 

business days after the date that the 

member first placed the temporary hold 

on the disbursement of funds or 

securities, unless otherwise terminated 

or extended by a state regulator or 

agency or court of competent 

jurisdiction.26 In addition, provided that 

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, the rule 

permits the member to extend the 

temporary hold for an additional 10- 

business days, unless otherwise 

terminated or extended by a state 

regulator or agency or court of 

competent jurisdiction.27

Retrospective Review Stakeholders 

and commenters to the Notice 20–34 

Proposal generally supported extending 

the current 25-business day hold period 

to provide member firms with a longer 

period to resolve matters.28 These 

Retrospective Review Stakeholders and 

commenters to the Notice 20–34 

Proposal indicated that the current 

period may not be sufficient when a 

matter is under consideration by a state 

regulator, state agency or court. Notably, 

this view was shared by NAPSA and the 

Philadelphia Financial Exploitation 

Task Force in comments to Regulatory 

Notice 19–27 and the Notice 20–34 

Proposal, with both commenters stating 

that adult protective services (APS) 

agencies, state regulators and law 

enforcement typically need more time to 

conduct thorough investigations. In 

contrast, in comments to Regulatory 

Notice 19–27 and the Notice 20–34 

Proposal, NASAA supported retaining 

the current 25-business day period, 

which aligns with the hold period 

provided in the NASAA Model Act to 

Protect Vulnerable Adults from 

Financial Exploitation (NASAA Model 

Act).29

During exams in 2019 focusing on 

Rule 2165, member firms expressed to 

FINRA the need for additional time to 

conduct investigations and resolve 

matters.30 Member firms were asked in 

the survey distributed to member firms 

about possible impediments to resolving 

a matter within the current 25-business 

day hold period provided by Rule 2165. 

Approximately 53% of survey 

respondents stated that they had been 

unable to resolve a matter within the 25- 

business day period. The most common 

reason was that the matter was under 

consideration by a state agency (such as 

APS) or a court. Other common reasons 

included: (1) The customer did not 

respond to inquiries from the firm; or (2) 

the customer did not believe that he or 

she was being financially exploited. For 

matters that took longer to resolve than 

the 25-business day period, 

approximately 35% of survey 

respondents indicated that it took on 

average 26–50 days to resolve the matter 

and approximately 59% of survey 

respondents indicated that it took on 

average 51–100 days to resolve the 

matter. 

FINRA recognizes that placing or 

extending a temporary hold on a 

disbursement is a serious step for a 

member and the affected customer. 

While FINRA recognizes that customers 

may be affected by temporary holds, the 

costs of financial exploitation can be 

devastating to customers, particularly 

older customers who rely on their 

savings and investments to pay their 

living expenses and who may not have 

the ability to offset a significant loss 

over time. Furthermore, the rule’s 

safeguards are designed to ensure that 

there is not a misapplication of the rule. 

To provide member firms with 

additional time to resolve matters and 

for APS agencies, state regulators and 

law enforcement to conduct thorough 

investigations, FINRA is proposing 

amending Rule 2165 to permit 

extending a temporary hold on a 

disbursement of funds or securities or a 

transaction in securities for an 

additional 30-business days if the 

member firm has reported the matter to 

a state regulator or agency or a court of 

competent jurisdiction.31

In addition, Rule 2165(d) requires 

members to retain records related to 

compliance with the rule, which shall 

be readily available to FINRA, upon 

request. To evidence compliance with 

Rule 2165 in placing or extending a 

temporary hold, FINRA is proposing 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 

regulator or agency of competent 

jurisdiction or a court of competent 

jurisdiction.32

Transactions in Securities 

While placing a hold pursuant to Rule 

2165 stops funds or securities from 

leaving a customer’s account, the rule 

currently does not apply to transactions 

in securities.33 Retrospective Review 

Stakeholders and commenters to the 

Notice 20–34 Proposal generally 

supported extending Rule 2165 to 

permit a member firm to place a 

temporary hold on a transaction in 

securities when the firm has a 

reasonable belief that the customer is 

being financially exploited.34 Even if a 

temporary hold is placed on a 

disbursement out of the customer’s 

account, these Retrospective Review 

Stakeholders and commenters to the 

Notice 20–34 Proposal noted that 

executing a related transaction may 

result in significant financial 

consequences for the customer (e.g., 

adverse tax consequences, surrender 

charges, the inability to regain access to 

a sold investment that has been closed 

to new investors or trading by a 

perpetrator in inappropriate high risk or 

illiquid securities). 

Currently, there are 34 states with 

laws that allow investment advisers or 

broker-dealers to place some form of 

hold. Several Retrospective Review 


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35As of June 2021, the following states permit 

holds on disbursement and transactions: Arkansas, 

Arizona, California, Florida, Iowa, Kentucky, 

Minnesota, Mississippi, Missouri, Nebraska, New 

Jersey, New Mexico, North Dakota, Oklahoma, 

South Carolina, Texas, Utah, Virginia, Washington 

and West Virginia. 

36See, e.g., comments to the Notice 20–34 

Proposal from PIABA. See also Consumer Financial 

Protection Bureau, Office of Financial Protection for 

Older Americans, Suspicious Activity Reports on 

Elder Financial Exploitation: Issues and Trends 

(Feb. 2019) (highlighting that SAR filings on elder 

financial exploitation quadrupled from 2013 to 

2017). See also U.S. Securities and Exchange 

Commission, Office of the Investor Advocate, Elder 

Financial Exploitation (June 2018) (providing an 

overview of studies on the prevalence of senior 

financial exploitation). 

37See, e.g., discussion in the Senior Helpline 

Anniversary Report regarding a member firm 

placing a temporary hold to prevent a senior 

investor from losing $200,000 (representing 

approximately two-thirds of the investor’s account) 

related to a CIA lawsuit scam. 

38See, e.g., in comments to the Notice 20–34 

Proposal the Miami Investor Rights Clinic stated 

that it ‘‘fully supports’’ the proposed amendments 

as they will provide greater protection to seniors 

and vulnerable adults that may be victims of 

financial exploitation. IRI also stated that the 

proposed amendments will better enable firms to 

prevent the financial exploitation of vulnerable 

Americans. 

39This lack of disciplinary action by FINRA and 

the states is also noted in the NASAA’s comment 

letter to the Notice 20–34 Proposal. 

40See, e.g., Protecting Senior Investors 2015– 

2020: An Update on the FINRA Securities Helpline 

for Seniors, Other FINRA Initiatives and Member 

Firm Practices (Apr. 2020). 

41See, e.g., comments to the Notice 20–34 

Proposal from Edward Jones and the Miami Investor 

Rights Clinic. 

42See, e.g., comments to the Notice 20–34 

Proposal from NASAA and the Pittsburgh Clinic. 

43See, e.g., comments to the Notice 20–34 

Proposal from Edward Jones. 

Stakeholders noted that while the 

NASAA Model Act does not extend to 

transactions, 20 of those 34 states (with 

approximately half of the U.S. 

population) have enacted laws 

permitting investment advisers and 

broker-dealers to place temporary holds 

on disbursements and transactions.35

While some state laws permit placing 

holds on transactions, FINRA is 

proposing to amend Rule 2165 to create 

the first uniform national standard for 

placing holds on securities transactions 

related to suspected financial 

exploitation. Under the safe harbor 

approach, a member firm would be 

permitted, but not required, to place a 

temporary hold on a transaction when 

there is a reasonable belief that the 

customer is being financially exploited. 

FINRA recognizes that placing a 

temporary hold on a transaction is a 

serious step for a member firm and the 

affected customer. But FINRA also 

recognizes that placing a temporary 

hold on the underlying transaction may 

prevent significant negative financial 

consequences for the customer. These 

negative financial consequences can 

result even if a temporary hold is placed 

on any related disbursement of funds 

out of the customer’s account. 

Moreover, as discussed above, the rule 

includes important safeguards designed 

to avoid misapplication of the rule. 

Need for the Proposed Amendments 

Retrospective Review Stakeholders 

and commenters to the Notice 20–34 

Proposal consistently indicated the 

prevalence of and problems associated 

with financial exploitation of senior 

investors,36 including the potential for 

significant and longstanding harm to 

customers.37 Moreover, Retrospective 

Review Stakeholders and commenters to 

the Notice 20–34 Proposal generally 

agree that member firms need tools to 

address suspected financial 

exploitation.38

As discussed in greater detail in 

section C infra, some Retrospective 

Review Stakeholders and commenters to 

the Notice 20–34 Proposal expressed 

concern that a temporary hold could be 

harmful to customers or that Rule 2165 

could be misused by member firms. 

Regarding the potential of customer 

harm, it is important to consider that 

Rule 2165 is available only if the 

member firm has a reasonable belief that 

the customer is being financially 

exploited. Moreover, the temporary hold 

may be placed only on the suspicious 

disbursement (or transaction if the 

proposed amendment to extend the rule 

to transactions is approved). Even if the 

member firm has placed a temporary 

hold on a suspicious disbursement or 

transaction pursuant to Rule 2165, a 

temporary hold may not be placed on 

non-suspicious disbursements or 

transactions (e.g., a regular mortgage 

payment). 

In evaluating concerns about potential 

misuse of Rule 2165, neither FINRA nor 

commenters were able to identify any 

reported customer complaints on Forms 

U4 or U5 or pursuant to Rule 4530 

related to placing a temporary hold 

pursuant to Rule 2165. Moreover, 

respondents to FINRA’s survey to 

member firms indicated that they had 

not reported a complaint on Form U4 or 

Form U5 or pursuant to Rule 4530 

related to placing any temporary holds. 

In addition, neither FINRA nor the 

states have brought any disciplinary 

action due to misuse of Rule 2165 or 

any state temporary hold law.39

The demonstrated and potential 

benefits of Rule 2165 weigh in favor of 

the proposed rule change. Notably, Rule 

2165 has been used by member firms to 

address suspected financial exploitation 

and these temporary holds have 

prevented significant financial harm to 

customers.40 Moreover, Retrospective 

Review Stakeholders and commenters to 

the Notice 20–34 Proposal stressed that, 

even if a temporary hold is placed on a 

disbursement of funds or securities, a 

customer can experience significant 

negative financial consequences if a 

suspicious transaction is permitted.41

Some Retrospective Review 

Stakeholders and commenters to the 

Notice 20–34 Proposal believe that the 

proposed extension of the hold period is 

too long and could be harmful to 

customers.42 Commenters to the Notice 

20–34 Proposal stated that some matters 

can be quickly resolved after placing a 

temporary hold, but complex matters 

that involve investigations by state 

regulators or agencies or legal actions in 

a court (e.g., financial exploitation of an 

elderly customer by a family member or 

caregiver) may need additional time to 

resolve.43 In considering the appropriate 

time period, it is notable that NAPSA 

and the Philadelphia Financial 

Exploitation Task Force—representing 

APS programs which play a critical role 

in investigating suspicions of financial 

exploitation—also expressed in their 

comments to the Notice 20–34 Proposal 

the need for additional time to conduct 

investigations. NAPSA’s comment letter 

to the Notice 20–34 Proposal also shared 

data in support of the need for a longer 

hold period in Rule 2165 that the 

average investigation duration of 

reported matters to the federal National 

Adult Maltreatment Reporting System 

(NAMRS) is 52.6 days. 

In considering the proposed extension 

of Rule 2165 to securities transactions, 

it is notable that approximately 50% of 

the U.S. population lives in a state that 

permits broker-dealers and investment 

advisers to place holds on suspicious 

securities transactions pursuant to state 

law. 

These state laws represent a 

patchwork where some customers may 

be afforded greater protection from 

financial exploitation than other 

customers. In contrast, Rule 2165 

provides a uniform national standard for 

placing temporary holds when there is 

a reasonable belief of financial 

exploitation. Moreover, Rule 2165 

incorporates numerous safeguards that 

apply to each temporary hold and that 

are designed to ensure that there is not 

a misapplication of the rule. 

If the Commission approves the 

proposed rule change, FINRA will 

announce the implementation date of 

the proposed rule change in a 

Regulatory Notice. The implementation 

date will be no later than 180 days 

following publication of the Regulatory 


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44 15 U.S.C. 78o–3(b)(6). 

45See supra note 36. 

46Thirty-one firms responded in the survey that 

they had placed a temporary hold. Out of the 31 

firms that indicated that they had placed a 

temporary hold, 17 firms indicated that it took more 

than the 25-business day period to resolve the 

matter, as currently provided in Rule 2165. 

Notice announcing Commission 

approval. 

2. Statutory Basis 

The proposed rule change is 

consistent with the provisions of 

Section 15A(b)(6) of the Act,44 which 

requires, among other things, that 

FINRA rules must be designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, and, in 

general, to protect investors and the 

public interest. The proposed rule 

change will promote investor protection 

by allowing for additional time for firms 

to resolve matters and for APS agencies, 

state regulators and law enforcement to 

conduct thorough investigations of 

suspected financial exploitation. 

Customers would benefit from this 

extension in instances where the 

additional time allows for a positive 

identification of financial exploitation 

and retention of the disbursement 

amount within the account. The 

proposed rule change also will allow 

firms to place temporary holds on 

transactions, which should prevent 

harm to exploited customers such as 

being subject to adverse tax 

consequences, early withdraw penalties 

or investments that do not align with 

their investor profiles. Moreover, the 

rule incorporates numerous safeguards 

that apply to each temporary hold and 

that are designed to ensure that there is 

not a misapplication of the rule. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

FINRA does not believe that the 

proposed rule change would result in 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. All member 

firms would be subject to the proposed 

rule change. 

Economic Impact Assessment 

FINRA has undertaken an economic 

impact assessment, as set forth below, to 

further analyze the regulatory need for 

the proposed rule change, its potential 

economic impacts, including 

anticipated costs, benefits, and 

distributional and competitive effects, 

relative to the current baseline, and the 

alternatives FINRA considered in 

assessing how best to meet its regulatory 

objective. 

Regulatory Need 

FINRA is active in its efforts to protect 

senior investors from financial 

exploitation. In the context of these 

efforts, and with evidence of a growing 

trend of such exploitation,45 FINRA 

conducted a review of relevant existing 

rules and administrative processes that 

help protect senior investors from 

financial exploitation. Through this 

review, FINRA has received feedback on 

the effectiveness and efficiency of Rule 

2165. 

Economic Baseline 

The economic baseline for the 

proposed rule amendments is the 

current Rule 2165 and its use by 

member firms, as well as existing firm 

policies and state laws related to 

protecting senior investors. As 

discussed above, in August 2019, 

FINRA launched a retrospective review 

to assess the effectiveness and efficiency 

of its rules and administrative processes 

that help protect senior investors from 

financial exploitation. To conduct the 

assessment phase of the retrospective 

rule review, FINRA first sought 

comment in Regulatory Notice 19–27. 

FINRA obtained input from several 

advisory committees comprising 

member firms of different sizes and 

business models, investor protection 

advocates, and member firms, and from 

trade associations. In addition, FINRA 

obtained the perspective of its operating 

departments that touch the rules and 

their administration. 

FINRA also distributed a survey to all 

member firms in the first quarter of 

2020, to which a subset of firms, ranging 

from small to large firms, responded. 

The purpose of the survey was to collect 

information and to provide member 

firms an additional opportunity to 

provide their views. The economic 

baseline, regarding the current 

application of the rule by firms and the 

effectiveness and efficiency of the rule, 

is established using the information 

obtained during the assessment phase. 

As noted above, with respect to the 

use of Rule 2165 in placing a temporary 

hold on disbursements, of the member 

firms that indicated having placed a 

temporary hold,46 approximately 53% 

of survey respondents stated that the 

firm had been unable to resolve the 

matter within the 25-business day 

period provided by the rule. For firms 

responding that any matter took longer 

to resolve than the 25-business day 

period, approximately 35% indicated 

that it took on average 26–50 days to 

resolve the matter and approximately 

59% indicated that it took on average 

51–100 days to resolve the matter. 

With respect to the issue of placing a 

temporary hold on transactions, 

currently 20 states (with approximately 

half of the U.S. population) have 

enacted laws permitting investment 

advisers and broker-dealers to place 

temporary holds on disbursements and 

transactions. 

Economic Impacts 

FINRA has analyzed the potential 

costs and benefits of the proposed 

amendments, and the different parties 

that are expected to be affected. FINRA 

has identified senior investors and 

member firms that serve senior investors 

as the main parties to be impacted by 

the proposed amendments. 

The proposed amendments to Rule 

2165 would permit extending a 

temporary hold for an additional 30- 

business days if the member firm has 

reported the matter to a state agency or 

a court of competent jurisdiction. 

FINRA believes that allowing an 

extension to the temporary hold period 

would provide firms additional time to 

resolve matters and for APS agencies, 

state regulators and law enforcement to 

conduct thorough investigations of 

suspected financial exploitation. 

Moreover, extensions may allow for 

greater collaboration and interaction 

between the member firm placing the 

hold and other authorities or regulators, 

on a local, state or national level. 

Customers would benefit from this 

extension in instances where the 

additional time allows for a positive 

identification of financial exploitation 

and retention of the disbursement 

amount within the account. 

Alternatively, if the additional time 

leads to a determination that no 

financial exploitation occurred, 

customers may incur costs from the 

extended delay in access to the funds. 

The proposed amendments would 

also extend Rule 2165 to permit a 

member firm to place a temporary hold 

on a transaction in securities when the 

firm has a reasonable belief that the 

customer is being financially exploited. 

Twenty states, together containing 

approximately half of the U.S. 

population, already permit firms to 

place temporary holds on transactions. 

The proposed amendments would 

impact firms in all states by providing 

a safe harbor under FINRA rules for 

firms to place holds on transactions. 

The extent of the impact would vary 

across firms depending on their 

decision to take advantage of the 

proposed extension of Rule 2165 to 


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47When asked in the survey about FINRA 

extending Rule 2165 to transactions, respondents 

were evenly split with 50% anticipating that the 

member firm would place holds on transactions 

pursuant to amended Rule 2165 and 50% 

anticipating that the firm would not place holds. 

48See discussion in ‘‘Economic Impacts’’ section 

above in section B, ‘‘Hold Period’’ section below in 

section C, and Regulatory Notice 20–34. 

49See Bruce I. Carlin, Tarik Umar, and Hanyi Yi, 

Deputization, National Bureau of Economic 

Research Working Paper No. 27225 (May 2020) 

(discussing the benefits of providing financial 

institutions tools to address suspected financial 

exploitation versus requiring specific actions). 

50See Exhibit 2b for a list of abbreviations 

assigned to commenters. 

51See CAI, Cambridge, Commonwealth, Edward 

Jones, Fidelity, FSI, IRI, Miami Investor Rights 

Clinic, MMLIS, NAPSA, Norcross, Philadelphia 

Financial Exploitation Task Force, SIFMA and 

Wells Fargo. 

52See Rule 2165(d). 

53See Supplementary Material .02 to Rule 2165. 

transactions.47 The proposed 

amendments would also impact the 

customers of those firms. In instances 

when a firm’s hold on a transaction 

prevented financial exploitation, the 

customer whose transaction was held 

would benefit from not incurring the 

negative financial consequences of the 

transaction. In instances when a 

transaction hold was executed and no 

financial exploitation was found, the 

economic impact of the hold stems 

primarily from the magnitude of the 

security’s price movement (positive or 

negative) between the time the hold was 

placed and the time it was lifted. 

Alternatives Considered 

FINRA considered various 

alternatives to the proposed rule 

amendments. First, FINRA considered 

different possible extensions of the 

temporary hold period, ranging from no 

extension to an extension of up to 75- 

business days. On the one hand, a 

longer temporary hold period would 

allow member firms more time to 

investigate and contact the relevant 

parties, as well as obtain input from a 

state regulator, agency, or court if 

needed. Alternatively, an extended 

temporary hold period could result in 

increased costs to both investors and 

firms.48 These include increased costs to 

investors from lost investment 

opportunities or liquidity problems and 

increased costs to firms from legal 

challenges to investigations, all of 

which are anticipated to be related to 

the length of the hold on disbursements. 

Considering these factors, as well as 

information from the various outreach 

efforts and stakeholder engagements, 

FINRA believes that the proposal strikes 

a balance across the spectrum of 

possible options. 

Second, FINRA considered not 

extending Rule 2165 to transactions, but 

rather keeping the temporary hold 

option only for disbursements. FINRA 

weighed the costs and benefits of doing 

so, as discussed above, also considering 

that some states already permit such a 

hold on transactions. Ultimately, FINRA 

has found the proposed amendment to 

expand Rule 2165 to transactions to 

strike an appropriate balance between 

regulatory burden, investor protection 

and investor choice. 

Third, FINRA considered requiring 

firms to place temporary holds, for 

either disbursements or transactions, 

rather than permitting it. FINRA 

believes that providing firms with the 

discretion of placing a hold, versus a 

requirement, results in incentives to use 

the hold option in a way that ultimately 

benefits both the firm and its’ 

customers.49

Finally, FINRA considered extending 

Rule 2165 to situations where a firm has 

a reasonable belief that one of its 

customers is exhibiting signs of 

diminished capacity or cognitive 

decline, affecting the customers’ ability 

to protect their own financial interests, 

without any evidence of financial 

exploitation. FINRA believes that the 

associated costs with establishing such 

a standard outweigh the potential 

benefits. Such an extension would give 

discretion to member firms that could 

directly or indirectly impede informed 

investor choice, with potential costs that 

might exceed the potential benefits from 

investor protection. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The proposed rule change was 

published for comment in Regulatory 

Notice 20–34. FINRA received 19 

comment letters in response to the 

Notice 20–34 Proposal. A copy of the 

Notice 20–34 Proposal is attached [sic] 

as Exhibit 2a. Copies of the comment 

letters received in response to the Notice 

20–34 Proposal are attached [sic] as 

Exhibit 2c.50

The comments and FINRA’s 

responses are set forth in detail below. 

Support for the Notice 20–34 Proposal 

Fourteen commenters expressed 

support for the Notice 20–34 Proposal.51

Several commenters stated that the 

proposed amendments will better 

protect vulnerable investors from 

financial exploitation. For example, 

Miami Investor Rights Clinic stated that 

it ‘‘fully supports’’ the proposed 

amendments as they will provide 

greater protection to seniors and 

vulnerable adults that may be victims of 

financial exploitation. IRI also stated 

that the proposed amendments will 

better enable firms to prevent the 

financial exploitation of vulnerable 

Americans. 

LPL supported the proposed 

amendments but requested that the hold 

period be further extended to allow for 

holds of up to 100-business days. 

Regarding the hold period in Rule 2165, 

FINRA has tried to strike 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, but also not 

permitting an open-ended hold period 

in recognition of the seriousness of 

placing a temporary hold. Rule 2165 

would continue to permit the temporary 

hold to be terminated or extended by a 

state regulator, state agency or court of 

competent jurisdiction. In addition, if 

the proposed hold period does not 

provide 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, FINRA may consider extending 

the temporary hold period in future 

rulemaking. 

Opposition to or Concerns With the 

Notice 20–34 Proposal 

PIABA supports enhanced protections 

for investors but expressed concern that 

member firms could misuse the 

proposed amendments. PIABA 

recommended that FINRA require in 

Rule 2165 that the member firm: (1) 

Update its written supervisory manuals 

to include training and review 

transactions suspected of elder abuse; 

(2) include in its retained records 

documentation of the firm’s reasonable 

efforts to quickly investigate the matter; 

and (3) file a report with the appropriate 

APS agency and state regulator as soon 

as reasonably practical but no later than 

seven business days from the initial 

hold period. 

Regarding PIABA’s suggested 

requirements, Rule 2165 currently 

includes several safeguards designed to 

prevent misapplication of the rule, 

including requiring that member firms 

that intend to place a hold pursuant to 

Rule 2165 must: (1) Retain records 

related to the firm’s internal 

investigation; 52 and (2) develop and 

document training policies or programs 

reasonably designed to ensure that 

associated persons comply with the 

requirements of the rule.53 FINRA also 

expects member firms to comply with 


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54See CAI, Cambridge, Commonwealth, Edward 

Jones, Fidelity, FSI, IRI, Miami Investor Rights 

Clinic, MMLIS, NAPSA, Norcross, Philadelphia 

Financial Exploitation Task Force, SIFMA and 

Wells Fargo. 

all applicable state requirements, 

including reporting requirements. 

NASAA’s letter acknowledges that 

neither FINRA nor the states have 

brought disciplinary action due to 

misuse of Rule 2165 or any state 

temporary hold laws by a member firm. 

However, as discussed in greater detail 

below, NASAA does not support 

extending the temporary hold period 

and expressed concern about the 

potential impact of a longer hold period 

on customers. FINRA’s responses to 

NASAA’s detailed concerns are 

included below in section C under 

‘‘Hold Period’’ and ‘‘Transactions in 

Securities.’’ 

Pittsburgh Clinic does not support 

current Rule 2165 or the proposed 

amendments because it believes that 

member firms could misuse temporary 

holds for their financial benefit. FINRA 

has extensively addressed the concerns 

of potential misuse above in section A 

under the ‘‘Need for the Proposed 

Amendments.’’ 

Pittsburgh Clinic also said that the 

survey of member firms should not be 

relied on to assess Rule 2165 or the 

proposed amendments because: (1) The 

survey respondents are member firms 

that stand to benefit from an increase to 

the extension of the hold period, as well 

as the rule’s safe harbor provisions; (2) 

the survey respondents were not 

required to provide any information to 

support their claims; and (3) the survey 

respondents represent an inadequate 

and unrepresentative sample size (the 

survey was provided to 3,516 member 

firms, of which only 238 member firms 

responded). 

FINRA engaged in extensive internal 

and external stakeholder outreach 

during the assessment phase of the 

retrospective review to assess the 

effectiveness and efficiency of FINRA’s 

rules and administrative processes that 

help protect senior investors from 

financial exploitation. This outreach 

included: (1) Seeking comment in 

Regulatory Notice 19–27 on several 

questions with respect to addressing 

financial exploitation and other 

circumstances of financial vulnerability 

for senior investors; (2) obtaining input 

from several advisory committees 

comprising member firms of different 

sizes and business models, investor 

protection advocates, member firms, 

and trade associations; (3) obtaining the 

perspective of FINRA’s operating 

departments that administer the rules 

and their administration; (4) considering 

FINRA examination observations and 

findings involving senior issues; and (5) 

developing an anonymous survey that 

was distributed to all member firms in 

the first quarter of 2020. In addition, as 

part of the action phase of the 

retrospective review, FINRA sought 

comment on the proposed amendments 

to Rule 2165 in Regulatory Notice 20– 

34. FINRA considered the collective 

feedback from the Retrospective Review 

Stakeholders and comments to the 

Notice 20–34 Proposal in assessing Rule 

2165 and the proposed amendments. 

The purpose of the survey distributed 

to all member firms was to collect 

information in order to validate the 

feedback received and to provide an 

additional opportunity for all member 

firms to provide their views. There were 

238 firms that responded to the survey, 

and the breakdown of these firm survey 

respondents according to firm size, as 

measured by the number of registered 

representatives, and the comparison to 

the general population of member firms, 

is provided in Table 1 below. With 

respect to the Pittsburgh Clinic 

comment letter, FINRA notes that: (1) 

The membership survey is one tool 

frequently used by FINRA in its 

outreach efforts to solicit information 

from its members; (2) the response rate 

mentioned is a lower bound when 

considering relevant member firms; and 

(3) the breakdown of survey 

respondents by firm size is mostly 

representative with respect to the full 

member firm population, as 

summarized in Table 1. 

Hold Period 

The majority of commenters 

supported the proposed amendment to 

extend a temporary hold for an 

additional 30 business days if the 

member firm has reported the matter to 

a state regulator or agency or a court of 

competent jurisdiction.54 For example, 

Edward Jones stated that the firm is 

often able to quickly resolve matters 

where it suspects financial exploitation 

of a senior or vulnerable investor by 

engaging the customer’s trusted contact 

person or using other tools, but the firm 

has experienced situations where the 

current 25-day period provided under 

Rule 2165 is insufficient. Edward Jones 

notes having experienced this situation 

when working with state agencies, such 

as APS, to investigate a case of 

suspected financial exploitation. 

Edward Jones stated that some APS 

agencies are not adequately resourced to 

quickly review these matters and yet are 

hesitant to request an extension of a 

hold until they determine whether 

exploitation exists. 

While NAPSA and Philadelphia 

Financial Exploitation Task Force 

previously supported a 60-business day 

extension in their comments to 

Regulatory Notice 19–27, they 

supported the proposed extension of the 

temporary hold period in the Notice 20– 

34 Proposal. NAPSA and Philadelphia 

Financial Exploitation Task Force noted 

that the latest data submitted to the 

NAMRS indicates that the average 

investigation duration of all reported 

cases is 52.6 days. Recognizing that 

financial exploitation investigations are 

often more complicated and time 

consuming, NAPSA and Philadelphia 

Financial Exploitation Task Force 

expressed appreciation for the 

additional days as a starting point, with 

the ability to revisit as more data 

becomes available. 

While acknowledging that an 

adequate period for review of the facts 

and circumstances must be allowed, 


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flrm Sile # RR, lndustl') Sm·,c~ Respondents 

Count Count 010 Tofal 

Tot.ll 3,519 
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55See File No. SR–FINRA–2016–039. 

56See CAI, Cambridge, Commonwealth, Edward 

Jones, Fidelity, FSI, IRI, LPL, Miami Investor Rights 

Clinic, MMLIS, NAPSA, Norcross, Philadelphia 

Financial Exploitation Task Force, SIFMA and 

Wells Fargo. 

Pittsburgh Clinic stated that the 

proposed longer hold period increases 

the possibility that a member firm could 

misuse a hold to harm an investor. 

Pittsburgh Clinic stated that the 

proposed hold period is too long 

because customers may need the funds 

to pay for living expenses. Pittsburgh 

Clinic also expressed concern that Rule 

2165 does not include a reporting 

requirement unless a member firm 

wants to avail itself of the additional 30- 

business day extension. 

NASAA believes that the current 25- 

business day hold period, with the 

authority for state regulators or agencies 

or the courts to terminate or extend, is 

the better approach as it provides time 

to conduct the investigation and avoids 

unintended hardships from lengthy 

delays. Moreover, NASAA supports 

involving state regulators or agencies or 

the courts within the initial 15-business 

day hold period specified in Rule 

2165(b)(2). 

Information gathered during the 

assessment phase of the retrospective 

review, including discussions during 

exams in 2019 focusing on Rule 2165 

and a survey to FINRA membership, 

supports the need for additional time to 

conduct investigations and resolve 

matters. NAPSA—representing APS 

programs which play a critical role in 

investigating suspicions of financial 

exploitation—also expressed the need 

for additional time to conduct 

investigations. NAPSA’s data that the 

average investigation duration of 

reported matters to the NAMRS is 52.6 

days also highlights the need for a 

longer period to conduct investigations 

and resolve matters. 

Retrospective Review Stakeholders 

and comments to the Notice 20–34 

Proposal indicated that some matters 

can be quickly resolved after placing a 

temporary hold (e.g., by explaining to 

the customer that the activity and 

requested disbursement fits a commonly 

known scam). However, complex 

matters that involve investigations by 

state regulators or agencies or legal 

actions in a court (e.g., financial 

exploitation of an elderly customer by a 

family member or caregiver) may need 

additional time to resolve. These 

complex matters often involve 

information gathering and sharing by 

the firm and the state agency or 

regulatory investigating the matter. 

To provide member firms with 

additional time to resolve matters and 

for APS agencies, state regulators and 

law enforcement to conduct thorough 

investigations, FINRA is proposing 

amending Rule 2165 to permit 

extending a temporary hold for an 

additional 30 business days if the 

member firm has reported the matter to 

a state agency or a court of competent 

jurisdiction. Extending the hold period 

as proposed is intended to address the 

complex matters that need additional 

time to resolve. In addition, some states 

mandate reporting of suspected 

financial exploitation by financial 

institutions, including broker-dealers, 

within a specified period of time. 

FINRA expects member firms to comply 

with all applicable state requirements, 

including reporting requirements. 

In addition, FINRA agrees with the 

commenters who stressed the need for 

a temporary hold not to interfere with 

non-suspicious disbursements that are 

needed for the customer’s expenses. A 

temporary hold pursuant to Rule 2165 

may be placed only on the suspicious 

disbursement (or transaction if the 

proposed amendment to extend the rule 

to transactions is adopted). A temporary 

hold may not be placed on nonsuspicious disbursements or 

transactions (e.g., a regular mortgage 

payment). 

Commonwealth supported the 

proposed extension of the temporary 

hold period and stated that there should 

be some additional remedy when a 

matter is not resolved at the end of the 

hold period. As previously addressed in 

the rule filing to adopt Rule 2165, if a 

member firm is unable to resolve an 

issue due to circumstances beyond its 

control, there may be circumstances in 

which a member firm may extend a 

temporary hold after the period 

provided under the safe harbor.55

NAPSA and the Philadelphia 

Financial Exploitation Task Force 

requested clarification on whether ‘‘a 

state regulator or agency of competent 

jurisdiction’’ would include state or 

local law enforcement. For purposes of 

Rule 2165, FINRA would interpret state 

or local law enforcement to be ‘‘a state 

regulator or agency of competent 

jurisdiction’’ and, accordingly, state or 

local law enforcement may terminate or 

extend a temporary hold pursuant to 

Rule 2165. 

SIFMA noted that, depending on the 

jurisdiction, APS may be a state or local 

agency and suggested revising proposed 

Rule 2165(b)(4) to refer to a ‘‘state 

regulator, or an agency of competent 

jurisdiction’’ to more clearly cover local 

APS. The inclusion of ‘‘a state regulator 

or agency of competent jurisdiction’’ in 

proposed Rule 2165(b)(4) is consistent 

with the language in current Rule 

2165(b)(2) and (3). For purposes of Rule 

2165, FINRA would interpret state or 

local APS to be ‘‘a state regulator or 

agency of competent jurisdiction’’ and, 

accordingly, state or local APS may 

terminate or extend a temporary hold 

pursuant to Rule 2165. 

Transactions in Securities 

The majority of commenters 

supported the proposed amendment to 

permit member firms to place a 

temporary hold on a securities 

transactions where there is a reasonable 

belief of financial exploitation.56 For 

example, NAPSA and the Philadelphia 

Financial Exploitation Task Force 

applauded the creation of a uniform 

national standard for placing holds on 

transactions related to suspected 

financial exploitation. Miami Investor 

Rights Clinic stated that substantial 

damage can result from securities 

transactions due to financial 

exploitation and that appropriate 

policies, procedures, and training can 

minimize any misapplication Rule 2165. 

Edward Jones stated that the financial 

harm resulting from exploitative 

transactions can take many forms, 

including selling long-held investments 

with low cost basis resulting in a 

significant tax liability, the sale of fixed 

income investments with yields more 

attractive than current rates, and the 

sale of variable annuities, which could 

lead to surrender charges. Edward Jones 

stated that the perpetrator of the 

exploitation could also utilize the 

proceeds of these sales to invest in highrisk securities further jeopardizing the 

financial security of the senior or 

vulnerable investor. Edward Jones 

stated that when balanced against the 

potential financial devastation to the 

senior or vulnerable investor, the 

proposal is a natural extension of the 

current rule that will further minimize 

the risk of financial harm and provide 

greater protection for senior and 

vulnerable investors. 

In its comment to Regulatory Notice 

19–27, PIABA cautioned FINRA against 

substantive changes to Rule 2165 that 

might conflict with state laws. However, 

PIABA noted that the recently adopted 

state laws allow for holds on securities 

transactions and disbursements. 

Pittsburgh Clinic expressed concern that 

the proposed extension gives too much 

authority to member firms with limited 

oversight and that the customer may 

bear the risk of loss if firm makes the 

wrong call in placing a hold. 

NASAA stated that if FINRA extends 

Rule 2165 to permit placing holds on 

securities transactions, the supervision 

and documentation requirements under 


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Federal Register / Vol. 86, No. 121 / Monday, June 28, 2021 / Notices 34093 

57See SEC Staff Bulletin: Risks Associated with 

Omnibus Accounts Transacting in Low-Priced 

Securities (Nov. 12, 2020), available at https://

www.sec.gov/tm/risks-omnibus-accountstransacting-low-priced-securities (SEC Staff 

Bulletin). The SEC Staff Bulletin provides that, 

where the broker-dealer determines that the risks 

cannot be appropriately managed, and particularly 

in the context of low-priced securities transactions, 

a broker-dealer should consider, among other 

things, restricting or rejecting transactions effected 

on behalf of the customers of a foreign financial 

institution. 

58See Miami Investor Rights Clinic, NAPSA, 

Philadelphia Financial Exploitation Task Force and 

Wells Fargo. 59See File No. SR–FINRA–2016–039. 

Rule 2165(c)–(d), and the training 

specified in Supplementary Material .02 

to Rule 2165, should be enhanced to 

require a documented rationale stating 

why the customer’s financial 

professional and the member firm 

believe that a transaction hold will 

protect the customer whereas a 

disbursement hold would not. NASAA 

stated that documentation should be 

reviewed as a part of FINRA 

examinations. NASAA believes that 

disbursement holds should be the 

default and that a transaction hold 

should be utilized only where a 

disbursement hold cannot adequately 

protect a customer. Furthermore, 

NASAA supports member firms 

establishing policies and procedures to 

address any harm that may result to the 

customer from a transaction hold. 

FINRA recognizes that placing a 

temporary hold on a transaction is a 

serious step for a member and the 

affected customer. Requiring that a 

member firm make a disbursement hold 

the default and use transaction holds 

only where a disbursement hold cannot 

adequately protect the customer would 

add complexity and uncertainty into the 

decision to place a temporary hold as 

the member firm would be required to 

weigh the consequences to the customer 

of placing the hold at different stages. 

Moreover, placing a temporary hold on 

the underlying transaction may prevent 

significant negative financial 

consequences for the customer. These 

negative financial consequences can 

result even if a temporary hold is placed 

on any related disbursement of funds 

out of the customer’s account. 

Importantly, the ability to place a 

hold on a transaction pursuant to Rule 

2165 would apply only if the firm had 

a reasonable belief that the customer 

was being financially exploited. As 

noted above, FINRA would pursue 

disciplinary action against a firm that 

uses Rule 2165 for inappropriate 

purposes. As discussed in Regulatory 

Notice 20–34 and NASAA’s comment 

letter to Regulatory Notice 20–34, 

neither FINRA nor the states have 

brought an action against a member firm 

for misuse of a temporary hold to 

address suspected financial 

exploitation. 

Some member firms already place 

holds on securities transactions 

pursuant to state law. As noted in 

section A of this filing, currently, 20 

states (with approximately half of the 

U.S. population) have enacted laws 

permitting investment advisers and 

broker-dealers to place temporary holds 

on disbursements and transactions. 

Amending Rule 2165 as proposed 

would create the first uniform national 

standard for placing holds on 

transactions related to suspected 

financial exploitation. Moreover, 

extending Rule 2165 to transactions 

would allow for consistent, national 

safeguards to avoid misapplication of 

temporary holds. 

NASAA also noted that the NASAA 

Model Act is limited to disbursements, 

in part, because a delay in a securities 

transaction could be deemed 

inconsistent with best execution 

requirements. Regarding whether the 

best execution obligation applies to a 

member firm’s decision to place a 

temporary hold on a securities 

transaction where there is a reasonable 

belief of customer financial exploitation, 

‘‘[b]roker-dealers are reminded that 

nothing under the federal securities 

laws or FINRA rules obligates them to 

accept an order where they believe that 

the associated compliance or legal risks 

are unacceptable.’’ 57

Mandatory Holds 

Miami Investor Rights Clinic noted 

that Rule 2165 is a safe harbor and that 

FINRA should consider amendments to 

Rule 2165 requiring that member firms 

place temporary holds. FINRA believes 

that a member firm using its discretion 

to place a temporary hold allows for the 

judicious use of temporary holds to 

protect customers from financial 

exploitation. 

Cognitive Decline or Diminished 

Capacity 

Some commenters supported 

extending Rule 2165 to situations where 

a firm has a reasonable belief that the 

customer has an impairment, such as 

diminished capacity, that renders the 

individual unable to protect his or her 

own interests, even though there is no 

evidence of financial exploitation.58

Some Retrospective Review 

Stakeholders also supported extending 

Rule 2165 to these situations. However, 

other Retrospective Review 

Stakeholders expressed concerns that 

member firms are not well-positioned to 

determine if a customer is suffering 

from cognitive decline or diminished 

capacity in the absence of suspected 

financial exploitation. In addition, in 

comments to Regulatory Notice 19–27, 

the Cornell Clinic, NASAA, PIABA and 

Pittsburgh Clinic expressed concerns 

that such an extension would give 

member firms too much discretion or 

would unfairly impede customer 

autonomy. 

FINRA has not proposed to 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 due to 

the concerns expressed that such an 

extension would give member firms too 

much discretion or would unfairly 

impede customer autonomy. Rather 

than rulemaking, FINRA summarized 

the information obtained about member 

firms’ procedures and practices in this 

area in Regulatory Notice 20–34 to assist 

other member firms and investors. 

Trusted Contact Person 

Where a customer has not named a 

trusted contact person, Wells Fargo 

suggested that FINRA give member 

firms the flexibility to contact a person 

‘‘reasonably associated’’ with the 

customer’s account. 

Under Rule 2165 as originally 

proposed in Regulatory Notice 15–37 

(October 2015) (Notice 15–37 Proposal), 

if the trusted contact person was 

unavailable, a member firm placing a 

hold would have been required to 

contact an immediate family member, 

unless the member reasonably believed 

that the immediate family member was 

financially exploiting the customer. 

Commenters to the Notice 15–37 

Proposal expressed concerns that the 

proposed requirement would impinge 

upon customer privacy and would be 

operationally challenging for member 

firms in identifying the customer’s 

immediate family members. Due to 

these concerns, FINRA removed the 

requirements in the Notice 15–37 

Proposal with respect to notifying an 

immediate family member when a 

temporary hold is placed. In the rule 

filing to adopt Rule 2165, FINRA noted 

that Rule 2165 would not preclude a 

member firm from contacting an 

immediate family member or any other 

person if the member has customer 

consent to do so and that contacting 

such persons may be useful to member 

firms in administering customer 

accounts.59

NAPSA and the Philadelphia 

Financial Exploitation Task Force 

recommended that FINRA pursue efforts 

to promote use of trusted contact 


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34094 Federal Register / Vol. 86, No. 121 / Monday, June 28, 2021 / Notices 

60The Investor Bulletin was published in March 

2020 and is available on the SEC’s website at 

https://www.investor.gov/introduction-investing/ 

general-resources/news-alerts/alerts-bulletins/ 

investor-bulletins-trusted-contact and on FINRA’s 

website at https://www.finra.org/investors/insights/ 

consider-adding-trusted-contact-to-your-account. 

61FINRA made a downloadable print version of 

the article available at https://www.finra.org/sites/ 

default/files/Protecting-Seniors-From-FinancialExploitation_0.pdf. 

62See Cambridge, FSI and SIFMA. 

63See File No. SR–FINRA–2016–039. 

64See File No. SR–FINRA–2016–039. 

65See Investment Company Institute, SEC NoAction Letter (June 1, 2018). 

persons by customers. FINRA has taken 

steps to encourage customers to name 

trusted contact persons. For example, 

the SEC’s Office of Investor Education 

and Advocacy and FINRA collaborated 

on an Investor Bulletin that helps 

customers understand the purpose of 

designating a trusted contact person for 

brokerage accounts, and encourages 

customers to designate a trusted contact 

person.60 In addition, in April 2018, 

FINRA published a similar article 

providing information on the trusted 

contact person-related amendments to 

Rule 4512 and Rule 2165 for investors 

and member firms.61 FINRA and the 

FINRA Investor Education Foundation 

have highlighted these articles on 

FINRA-managed social media channels, 

including Facebook and Twitter, and 

staff regularly discuss the benefits of 

designating a trusted contact when 

speaking with individual investors. 

Reporting Requirements 

Several commenters expressed 

concern that Rule 2165’s safe harbor 

does not extend to complaints 

reportable on Forms U4 (Uniform 

Application for Securities Industry 

Registration or Transfer) or U5 (Uniform 

Termination Notice for Securities 

Industry Registration), or pursuant to 

Rule 4530 about an associated person 

whose actions were within the safe 

harbor and stated that some member 

firms and associated persons may 

choose not to place a hold pursuant to 

Rule 2165 because of concerns about a 

possible customer complaint.62 These 

commenters requested guidance on 

when a Rule 2165-related complaint 

would be reportable and supported 

developing a specific problem code for 

reporting any Rule 2165-related 

complaint to FINRA pursuant to FINRA 

Rule 4530. FSI suggested that FINRA 

consider additional protections for 

financial professionals so they can 

confidently act when there is possible 

exploitation that could have long-term 

negative consequences on a client’s 

financial future and overall well-being. 

As discussed in Regulatory Notice 20– 

34, to date, based on FINRA’s review of 

reported complaints, member firms have 

not reported a complaint on Forms U4 

or U5 or pursuant to Rule 4530 related 

to placing a temporary hold pursuant to 

Rule 2165. Moreover, survey 

respondents indicated that they had not 

reported a complaint on Form U4 or 

Form U5 or pursuant to Rule 4530 

related to placing any temporary holds. 

FINRA does not currently plan to 

propose guidance regarding when a 

Rule 2165-related complaint would be 

reportable or develop a specific problem 

code for reporting any Rule 2165-related 

complaint to FINRA pursuant to FINRA 

Rule 4530. In considering whether a 

complaint is reportable, member firms 

should use the existing publicly 

available guidance. FINRA may 

reconsider this issue or develop a 

specified problem code for reporting 

any Rule 2165-related complaint to 

FINRA pursuant to FINRA Rule 4530 if 

complaints are reported in the future 

and they appear to have a detrimental 

impact on the protection of seniors and 

other vulnerable adults. 

Customer Actions 

Cambridge supported extending the 

safe harbor provided by Rule 2165 to 

protecting member firms and registered 

representatives from customer actions as 

a result of steps taken by a member firm 

pursuant to Rule 2165. FINRA 

previously addressed this issue when 

adopting Rule 2165, noting that member 

firms today make judgments with regard 

to making or withholding disbursements 

and already face litigation risks with 

respect to these decisions.63 Rule 2165 

is designed to provide regulatory relief 

to member firms by providing a safe 

harbor from FINRA rules for a 

determination to place a hold. Some 

states may separately provide immunity 

to member firms under state law. 

Scope of Rule 2165 

Because some state temporary hold 

laws cover customers younger than 65 

years of age, LPL suggested that FINRA 

amend the definition of ‘‘specified 

adult’’ in Rule 2165(a)(1) to include 

persons 60 years of age and older. In 

adopting Rule 2165, FINRA solicited 

feedback regarding whether the ages 

used in the definition of ‘‘specified 

adult’’ in proposed Rule 2165 should be 

modified or eliminated. As discussed in 

the rule filing proposing Rule 2165, 

some commenters suggested including 

an age lower than 65 and some 

commenters suggested including an age 

over 65 in the definition.64 The 

inclusion of persons 65 and older in the 

definition reflects, in part, that federal 

agencies, FINRA and NASAA have 

focused on persons age 65 and older for 

various senior initiatives. In addition, 

the definition of ‘‘specified adult’’ in 

Rule 2165(a)(1) also includes persons 

age 18 and older who the member 

reasonably believes has a mental or 

physical impairment that renders the 

individual unable to protect his or her 

own interests. 

Manabat stated that FINRA rules 

protecting senior investors should apply 

to non-U.S. investors. For clarity, 

FINRA rules apply to U.S. and non-U.S. 

customers of member firms. 

NAPSA and the Philadelphia 

Financial Exploitation Task Force 

recommended that investment 

companies, such as mutual funds, be 

permitted to place temporary holds. In 

2018, staff in the SEC’s Division of 

Investment Management issued a noaction letter to the Investment Company 

Institute stating 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.65 The no-action letter 

permits 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. 

If a member firm places a temporary 

hold, Rule 2165 requires the member to 

immediately initiate an internal review 

of the facts and circumstances that 

caused the member to reasonably 

believe that financial exploitation of the 

specified adult has occurred, is 

occurring, has been attempted or will be 

attempted. FSI recommended that 

FINRA provide additional guidance to 

member firms on conducting these 

internal reviews. FSI stated that state 

regulators and agencies have the 

appropriate expertise to conduct these 

types of investigations and member 

firms work cooperatively to provide 

state regulators and agencies with 

requested information. FSI stated that 

member firms have access to internal 

records that evidence the customer’s 

regular trading and account 

disbursement activity, but firms do not 

want to, for example, front-run and 

jeopardize a criminal investigation by 

trying to contact and interview 

witnesses. 


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Federal Register / Vol. 86, No. 121 / Monday, June 28, 2021 / Notices 34095 

66See File No. SR–FINRA–2016–039. 

67See SEC Staff Bulletin. 

68See FINRA Investor Education Foundation 

Investor Protection Campaign Research, available at 

www.finrafoundation.org/fraudresearch. 

69See Protecting Senior Investors 2015–2020: An 

Update on the FINRA Securities Helpline for 

Seniors, Other FINRA Initiatives and Member Firm 

Practices (Apr. 2020). 

70See, e.g., articles such as Protecting Seniors 

from Financial Exploitation and Don’t Give in to 

Power of Attorney Pressure; Investor Alerts such as 

Power of Attorney and Your Investments–10 Tips, 

Plan for Transition: What You Should Know About 

the Transfer of Brokerage Account Assets on Death, 

and Seniors Beware: What You Should Know 

About Life Settlements; and FINRA’s Retirement 

web page for investors. 

71See http://www.finra.org/sites/default/files/ 

senior_safe_act_factsheet.pdf. 

As stated in the rule filing proposing 

the adoption of Rule 2165, FINRA 

believes that the appropriate internal 

review will depend on the facts and 

circumstances of the situation.66

Member firms have discretion in 

conducting a reasonable internal review 

under proposed Rule 2165. In addition, 

Rule 2165 gives member firms flexibility 

regarding notifying some parties when 

the member firm reasonably suspects 

that the party is involved in the 

financial exploitation. Specifically, Rule 

2165(b)(1)(B)(i)–(ii) provides that a 

member firm is not required to provide 

notification of a temporary hold to a 

party authorized to transact business on 

the account or the trusted contact 

person if the member firm reasonably 

suspects that the authorized party or 

trusted contact person, respectively, 

may be engaged in the financial 

exploitation of the specified adult. 

If Rule 2165 is extended to allow for 

temporary holds on transactions in 

securities, FSI suggested that FINRA 

expand the application of the safe 

harbor provided by Rule 2165 to cover 

both FINRA Rule 3260 (Discretionary 

Accounts) and FINRA Rule 5310.01 

(Execution of Marketable Customer 

Orders). 

Rule 3260’s scope and purpose are 

distinguishable from permitting a 

member firm to place a temporary hold 

on a transaction when there is a 

reasonable belief that the customer is 

being financially exploited. Rules 3260 

addresses the creation and maintenance 

of discretionary accounts and requires 

firms to have procedures to identify and 

prevent excessive trading or ‘‘churning’’ 

in such accounts. Rule 3260 is intended 

to protect customers from the misuse of 

discretionary power by firms and 

associated persons. 

In considering whether Rule 2165’s 

safe harbor needs to be extended to 

address rules relating to order 

execution, ‘‘[b]roker-dealers are 

reminded that nothing under the federal 

securities laws or FINRA rules obligates 

them to accept an order where they 

believe that the associated compliance 

or legal risks are unacceptable.’’ 67

Outreach and Collaboration 

CAI requested that FINRA coordinate 

with state authorities and SEC on 

measures to address financial 

exploitation. FINRA has and will 

continue to prioritize senior investors 

and address financial exploitation of 

senior investors, including through: 

• Carrying out a multi-faceted 

investor protection campaign through 

the FINRA Foundation aimed at 

promoting awareness about, and 

support for, the prevention of financial 

fraud and exploitation, while 

simultaneously empowering financial 

consumers to protect themselves and 

their loved ones, using tactics including: 

Æ Training law enforcement and 

victim advocates to detect, investigate, 

and assist consumers with concerns of 

financial fraud and exploitation in 

collaboration with federal and state 

securities regulators, APS groups, 

NAPSA, the National Center for Victims 

of Crime, the National White Collar 

Crime Center, and staff from FINRA’s 

National Cause and Financial Crimes 

Detection Programs; 

Æ Engaging in consumer outreach— 

often in coordination with the SEC, 

CFPB, state securities regulators, and 

nonprofits such as AARP and Better 

Business Bureaus—to empower 

financial consumers to spot, avoid, and 

report financial fraud; 

Æ Conducting, supporting, and 

disseminating research focused on 

financial exploitation and fraud as well 

as aging and financial decision-making, 

which is shared with internal and 

external stakeholders; 68

Æ Collaborating with Committees and 

Task Forces focused on issues of 

financial fraud and exploitation, 

including working with the Department 

of Justice’s Elder Justice Initiative, 

serving on NAPSA’s Financial 

Exploitation Advisory Board, serving on 

NASAA’s Senior Issues and Diminished 

Capacity Committee Advisory Council, 

participating on various multidisciplinary teams (MDTs) aimed at 

protecting and assisting vulnerable 

adults, and holding joint trainings with 

the CFPB’s Office of Older Americans, 

and meeting periodically with state 

securities regulators and states’ 

attorneys general to discuss senior 

investor protection issues; 69

• Issuing alerts and articles that 

educate investors about important 

issues and highlighting risks facing 

senior investors; 70

• Launching the dedicated FINRA 

Securities Helpline for Seniors®— 

available at (844) 57–HELPS—to 

provide senior investors and their 

family members with a supportive place 

to get assistance from specially trained 

FINRA staff related to concerns they 

have with their brokerage accounts and 

investments; 

• Collaborating with NASAA and the 

SEC to address senior investor 

protection, including issuing a Senior 

Safe Act Fact Sheet designed to raise 

awareness among member firms, 

investment advisers and transfer agents 

about the Act and its immunity 

provisions; 71

• Producing and presenting on inperson and virtual panels addressing 

senior investor protection with the SEC, 

state securities regulators, NASAA, APS 

offices, NAPSA, FBI and other agencies; 

and 

• Meeting with adult protective 

services staff in multiple states, in part 

through NAPSA, to increase 

coordination of senior investor 

protection efforts and highlight FINRA 

Rule 2165’s provision that APS can 

direct a member firm to terminate or 

extend a temporary hold authorized by 

the Rule. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

(A) By order approve or disapprove 

such proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

FINRA–2021–016 on the subject line. 


khammond on DSKJM1Z7X2PROD with NOTICES
34096 Federal Register / Vol. 86, No. 121 / Monday, June 28, 2021 / Notices 

72 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. 42455 

(February 24, 2000), 65 FR 11388 (March 2, 2000) 

(In the Matter of the Application of The 

International Securities Exchange LLC for 

Registration as a National Securities Exchange; 

Findings and Opinion of the Commission). 

4Prior Interpretation and Policy .02 to Rule 8.7 

provided, ‘‘Market-Makers are expected ordinarily 

to refrain from purchasing a call option or a put 

option at a price more than $0.25 below parity, 

although a larger amount may be appropriate 

considering the particular market conditions. In the 

case of calls, parity is measured by the bid in the 

underlying security, and in the case of puts, parity 

is measured by the offer in the underlying security. 

The $0.25 amount above may be increased, or the 

provisions of this Interpretation may be waived, by 

the Exchange on a series-by-series basis.’’ 

5Cboe’s rule change merely noted, with respect 

to the removal of Cboe’s parity rule, that the filing 

makes non-substantive changes to the rule 

governing a Market-Maker’s general obligations 

(current Rule 8.7, in part), most of which remove 

redundant provisions that are already covered 

under the umbrella of a Market-Maker’s obligation 

to engage in dealing to maintain fair and orderly 

markets. No specific argument is provided with 

respect to removing this provision. See Securities 

Exchange Act 87024 (September 19, 2019), 84 FR 

50545 (September 25, 2019) (SR–CBOE–2019–059) 

(Notice of Filing and Immediate Effectiveness of a 

Proposed Rule Change To Amend Certain Rules 

Relating To Market-Makers Upon Migration to the 

Trading System Used by Cboe Affiliated 

Exchanges). 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–FINRA–2021–016. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of such filing 

also will be available for inspection and 

copying at the principal office of 

FINRA. All comments received will be 

posted without change. Persons 

submitting comments are 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–FINRA– 

2021–016 and should be submitted on 

or before July 19, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.72

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–13653 Filed 6–25–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92226; File No. SR–ISE– 

2021–14] 

Self-Regulatory Organizations; Nasdaq 

ISE, LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend Options 2, 

Section 4 (Obligations of Market 

Makers), Options 4, Section 3 (Criteria 

for Underlying Securities), Options 4, 

Section 8 (Long-Term Options 

Contracts), and Options 4A, Section 12 

(Terms of Index Options Contracts) 

June 22, 2021. 

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

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on June 9, 

2021, Nasdaq ISE, LLC (‘‘ISE’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II, 

below, which Items have been prepared 

by the Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Options 2, Section 4, Obligations of 

Market Makers; Options 4, Section 3, 

Criteria for Underlying Securities; 

Options 4, Section 8, Long-Term 

Options Contracts; and Options 4A, 

Section 12, Terms of Index Options 

Contracts. 

The text of the proposed rule change 

is available on the Exchange’s website at 

https://listingcenter.nasdaq.com/ 

rulebook/ise/rules, at the principal 

office of the Exchange, and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend 

Options 2, Section 4, Obligations of 

Market Makers; Options 4, Section 3, 

Criteria for Underlying Securities; 

Options 4, Section 8, Long-Term 

Options Contracts; and Options 4A, 

Section 12, Terms of Index Options 

Contracts. Each change will be 

described below. 

Options 2, Section 4(a) 

The Exchange proposes to remove the 

following rule text from Options 2, 

Section 4(a), which has been in place 

since ISE’s inception: 3

. . . Ordinarily, Market Makers are expected 

to: 

(1) Refrain from purchasing a call option or 

a put option at a price more than $0.25 below 

parity, although a larger amount may be 

appropriate considering the particular market 

conditions. In the case of calls, parity is 

measured by the bid in the underlying 

security, and in the case of puts, parity is 

measured by the offer in the underlying 

security. 

(2) The $0.25 amount above may be 

increased, or the provisions of this Rule may 

be waived, by the Exchange on a series-byseries basis. 

This proposed rule text also previously 

existed on Cboe Exchange, Inc. within 

prior Rule 8.7 4 and was removed from 

Cboe’s Rulebook in 2019.5 The 


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