In an effort to further protect senior investors from financial exploitation, the Financial Industry Regulatory Authority is proposing rule modernization changes.
The changes, detailed in Regulatory Notice 26-02, are amendments to FINRA Rules 4512 (Customer Account Information) and 2165 (Financial Exploitation of Specified Adults) and proposed Rule 2166 (Temporary Delays for Suspected Fraud).
FINRA noted that combating financial fraud has become increasingly important as scams, fraud and financial exploitation have surged in recent years, driven in part by technological advances that enable sophisticated criminal schemes targeting investors of all ages.
One of the key changes being proposed is a tool aimed at allowing member firms more ability to halt transactions that could be suspected fraud through a so-called ‘speed bump’. The proposal, new Rule 2166, 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 proposed rule “is designed to prevent customer losses by giving member firms a brief intervention window (or ‘speed bump’) to facilitate outreach by the firm to the customer (away from perpetrator influence), information gathering, conversation and provision of relevant educational resources about fraud schemes,” FINRA said, adding, “The goal is to persuade the customer to recognize the attempted fraud and not to proceed with the transaction or disbursement.”
Another proposed change aims to increase the use of “trusted contacts” by giving firms additional flexibility to have clients name an emergency contact that can be used across all of the client’s accounts at the firm. Member firms would also be permitted to use the alternative term “emergency contact”.
“While the trusted contact framework has proven valuable, greater rates of adoption would bring significantly more value to investor protection,” FINRA said, adding that the changes are designed to increase the usage of trusted contacts.
FINRA is also proposing to extend the maximum temporary hold period under an existing safe-harbor provision that allows firms to put holds on transactions involving senior investors, or investors with cognitive capacity issues, in cases of suspected financial exploitation. The maximum temporary hold period under Rule 2165 would be extended from 55 business days to 145 business days, in three 30-business day increments, subject to safeguards.
“Given the complexity of modern fraud schemes and the time required for effective investigation and intervention, FINRA believes that extending the permissible temporary hold period would provide member firms with additional time to work with customers, trusted contacts and appropriate authorities to prevent or mitigate harm,” it said.
In its notice, FINRA also detailed the impact fraud can have on older investors. “Americans over age 60 lost more than $4.8 billion to fraud in 2024,” the authority stated. “This estimate represents not only devastating financial losses but also the profound personal toll fraud takes on victims, including embarrassment, isolation and diminished quality of life. Moreover, the actual magnitude of fraud losses is unknown due to underreporting. For senior investors, these losses can be particularly catastrophic. Unlike younger investors who may have years of future earnings to rebuild their financial security, senior investors are often living on fixed incomes derived from a lifetime of savings, with limited or no ability to offset significant losses. The irreversible nature of these losses underscores why FINRA has placed special emphasis on protecting this vulnerable population and why member firms play such a crucial role as the first line of defense against exploitation.”
FINRA adds that the FBI reported a record-breaking $16.6 billion in losses in 2024, representing a 33 percent increase in losses from 2023. Globally, consumers lost over $1 trillion to scams in 2024.
The authority encouraged all interested parties to submit comments on the proposed rule changes. Comments must be received by March 9, 2026.
Hyman Cotter PC routinely represents investors harmed when financial professionals and their firms engaged in misconduct that caused their clients investment losses. Our team includes lawyers who have worked for large financial institutions, including Morgan Stanley and UBS Financial Services, and regulatory bodies such as the SEC. If you think your financial professional or firm engaged in misconduct that caused you investment losses, contact Hyman Cotter PC at 312-291-4600 or through our online contact form for a no-cost evaluation of your matter.
