The CFP Board joined with the Financial Planning Association (FPA), and the National Association of Personal Financial Advisors (NAPFA) in urging the Financial Industry Regulatory Authority to strengthen its rules to protect seniors and other vulnerable adults from financial exploitation and all investors from fraud.
The three organizations submitted a joint comment letter to FINRA recently to express their views on the matter. The letter notes that incidents of reported investment fraud and corresponding consumer losses have soared in recent years, especially among seniors, who are reported to have lost over $4.8 billion in 2024 alone.
Recently FINRA announced a campaign encouraging investors to provide their financial firms with a trusted contact. This individual would be authorized to be contacted by the firm in case of suspicious activity in the investor’s account, or if the firm has not been able to reach the investor after making several attempts.
The joint comment letter said that the CFP Board, FPA and NAPFA “strongly support FINRA’s continued efforts to provide firms and financial professionals with important tools to combat this widespread problem, including the proposed amendments designed to encourage more investors to identify trusted contacts and to implement and extend temporary hold periods when financial exploitation or fraud is suspected.”
The organizations recommended that FINRA go even further in fraud prevention by requiring customers to either designate a trusted contact or affirmatively “opt out” of doing so; consider mandatory reporting of suspected financial exploitation or fraud; and provide an extended initial hold time for suspected fraud on all accounts to better protect everyone in cases of emergencies.
The letter notes that currently, FINRA Rule 4512 requires only “reasonable efforts” from firms to obtain trusted contact information. “This has resulted in only 42% of consumers listing a trusted contact, according to FINRA’s Investor Education Foundation survey,” the organizations state. “FINRA must address this issue. We recommend that FINRA further amend Rule 4512 to require firms to have customers designate a trusted contact or have customers affirmatively opt out of the framework after they have been informed of the benefits of listing a trusted contact.”
CFP Board, FPA and NAPFA say this change would help normalize the designation of a trusted contact and facilitate meaningful conversations between financial professionals and their clients.
It was also recommended that FINRA should require firms to remind customers annually that firms will reach out to the trusted contact if they suspect the client may be the victim of a scam or fraud (so long as the trusted contact is not the potential perpetrator) and that doing so is not a privacy breach. This would make it easier for customers to understand that firms are working in their best interest by following this protocol.
One recent FINRA rule proposal would permit a temporary delay of up to five business days on disbursements or transactions when there is a reasonable belief of fraud. This separate safe harbor framework, modeled on existing Rule 2165, would permit member firms to use a “speed bump” to alert a customer of suspected fraud. The CFP Board, FPA and NAPFA are calling for a longer speed bump.
“We suggest that FINRA consider an initial 15-business-day hold for all suspected fraud”, the organizations state. “Aligning the duration of Rule 2166 with the initial 15-day hold period of Rule 2165 would create a uniform operational standard for firms, reducing the risk of administrative errors during high-stress fraud events.”
Click here to read the full joint comment letter to FINRA.
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