Notice2026-18293
Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change To Amend FINRA Rules 0150 (Application of Rules to Exempted Securities Except Municipal Securities), 2165 (Financial Exploitation of Specified Adults) and 4512 (Customer Account Information) and To Adopt FINRA Rule 2166 (Temporary Delays for Suspected Fraud)
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
September 9, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 173 (Wednesday, September 9, 2026)</title>
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[Federal Register Volume 91, Number 173 (Wednesday, September 9, 2026)]
[Notices]
[Pages 57407-57418]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-18293]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-106275; File No. SR-FINRA-2026-018]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of a Proposed Rule Change To Amend
FINRA Rules 0150 (Application of Rules to Exempted Securities Except
Municipal Securities), 2165 (Financial Exploitation of Specified
Adults) and 4512 (Customer Account Information) and To Adopt FINRA Rule
2166 (Temporary Delays for Suspected Fraud)
September 3, 2026.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Exchange Act'' or ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on August 20, 2026, 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to amend FINRA Rules 0150 (Application of Rules
to Exempted Securities Except Municipal Securities), 2165 (Financial
Exploitation of Specified Adults) and 4512 (Customer Account
Information) and to adopt new FINRA Rule 2166 (Temporary Delays for
Suspected Fraud) to modernize protections for senior and vulnerable
investors and to make additional fraud prevention tools available for
all customers.
The text of the proposed rule change is available on FINRA's
website at <a href="http://www.finra.org">http://www.finra.org</a> and at the principal office of FINRA.
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
I. Background
A. FINRA's Existing Senior Investor Protection Rules
FINRA has long been committed to protecting senior investors and
combating financial fraud through regulation, investor education and
assistance, and engagement with member firms, state and federal
agencies and investor protection advocates. FINRA recognizes that
member firms are on the front line of protecting customers from threat
actors and has developed a regulatory framework designed to provide
member firms with flexible tools to help protect senior and vulnerable
investors from financial exploitation. This framework includes two
rules that facilitate early detection and intervention through member
firms' ability to contact a customer's trusted contact person and place
a temporary hold on a transaction or disbursement when they have a
reasonable suspicion of financial exploitation.\3\
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\3\ Other FINRA rules that are generally applicable to all
customers, but can be particularly relevant in protecting senior
investors, include FINRA Rule 3240 (Prohibition on Borrowing From or
Lending to Customers) and FINRA Rule 3241 (Registered Person Being
Named a Customer's Beneficiary or Holding a Position of Trust for a
Customer).
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Trusted Contact Persons
Rule 4512, in part, requires member firms to make reasonable
efforts to obtain the information for a trusted contact person upon the
opening of all non-institutional customer accounts. The trusted contact
person is intended to serve as a resource for the member firm in
various situations, including helping to update customer contact
information when a customer becomes unavailable, assisting when
concerns arise over possible diminished capacity or other health
issues, protecting assets, and responding to possible financial
exploitation. Rule 4512 is not limited to senior investors, and a
trusted contact person can be a valuable tool for customers of all
ages. Designation as a trusted contact person does not give the person
power of attorney-type authority over customer accounts, and does not
give the person authority to execute transactions or make decisions
about an account. Rather, trusted contact persons are an important
resource for member firms and customers in special circumstances.
While the trusted contact framework has proven valuable, greater
rates of adoption could significantly improve investor protection.
According to the FINRA Foundation's National Financial Capability
Study: 2024 Investor Survey, 42 percent of respondents say they have
authorized a trusted contact person for their investment accounts, up
from 38 percent in 2021, while over half (53 percent) say they have
not.\4\ Among those who have not named a trusted contact person, nearly
half (49 percent, or just over one-quarter of all survey respondents)
say they would be willing to do so.\5\
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\4\ Judy T. Lin, Christopher Bumcrot, Olivia Valdes, Gary
Mottola, Susan Sarver, Robert Ganem, Christine Kieffer, & Gerri
Walsh, Investors in the United States: A Report of the National
Financial Capability Study, FINRA Investor Education Foundation
(December 2025) (``National Financial Capability Study'').
\5\ To increase familiarity with and use of this important tool,
FINRA has sought to educate investors about trusted contact persons
and highlight the benefits of naming a trusted contact person. See,
e.g., FINRA, SEC & North American Securities Administrators
Association, Inc. (``NASAA''), Investor Bulletin: Why You Should
Consider Adding a Trusted Contact to Your Account (August 25, 2025).
FINRA has also shared effective practices with member firms to
highlight approaches that have helped some member firms achieve
higher rates of trusted contact adoption. See Regulatory Notice 22-
31 (December 2022); see also FINRA, 2025 FINRA Annual Regulatory
Oversight Report (January 2025); FINRA, 2026 FINRA Annual Regulatory
Oversight Report (December 2025).
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[[Page 57408]]
Temporary Hold Framework
Rule 2165 represents the first uniform national standard for
placing temporary holds to address suspected financial exploitation.
The rule permits a member firm to place a temporary hold, with stated
time limits, on a securities transaction or disbursement of funds or
securities from the account of a ``Specified Adult'' when the member
firm reasonably believes that financial exploitation of that adult has
occurred, is occurring, has been attempted or will be attempted. For
purposes of Rule 2165, Specified Adult means: ``(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.''
\6\
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\6\ Rule 2165(a)(1).
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Currently, Rule 2165 permits a temporary hold for initial periods
of 15 to 25 business days, with the possibility of a single 30-
business-day extension (for a total maximum of 55 business days) if the
member firm has reported the matter to a state regulator or agency of
competent jurisdiction or a court of competent jurisdiction and the
member firm continues to have a reasonable belief of financial
exploitation. The rule allows member firms to extend a temporary hold
beyond the 55-business-day maximum upon a state agency's request to do
so, which is not required to be accomplished through a formal order.\7\
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\7\ See FINRA, Frequently Asked Questions Regarding FINRA Rules
Relating to Financial Exploitation of Senior Investors at Q.3.2
(``FINRA Seniors FAQs'').
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Temporary holds under Rule 2165 have played an important role in
providing member firms a way to quickly respond to suspicions of
financial exploitation before losses occur for customers. However,
FINRA has learned through research and feedback from member firms and
other interested parties that, in some cases, the current 55-business-
day limit poses challenges. Notably, according to the National Adult
Protective Services Association (``NAPSA''), financial exploitation
investigations are often the most complex and time-consuming, and in
many instances can take longer than a year.\8\
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\8\ See Letter from Jennifer Spoeri, Executive Director, William
Benson & Kendra Kuehn, National Policy Advisors, and Joe Snyder,
Policy Chair, National Adult Protective Services Association, to
Jennifer Piorko Mitchell, Office of the Corporate Secretary, FINRA,
dated June 12, 2025 (noting that FINRA's prior amendments to Rule
2165, extending the temporary hold period to 55 business days,
``mirror the average time it takes to conduct an APS investigation.
This average encapsulates all categories of reports that APS
investigates (i.e., physical, sexual and emotional abuse, self-
neglect, caregiver neglect), in addition to financial abuse.
Financial exploitation investigations are often the most complex and
time-consuming and there are many examples of cases being open for
more than a year.'').
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B. The Growing Threat of Fraud and Financial Exploitation
The Federal Trade Commission (``FTC'') found the overall cost of
fraud to older adults in 2024 to be approximately $81.5 billion when
accounting for underreporting.\9\ Representing a portion of fraud
losses, the Federal Bureau of Investigation's internet Crime Complaint
Center (``FBI IC3'') received reports of more than $7.7 billion lost to
fraud by Americans over age 60 in 2025.\10\ These estimates represent
not only devastating financial losses but also the profound personal
toll fraud takes on victims, including shame, isolation and diminished
quality of life.
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\9\ Federal Trade Commission (``FTC''), Protecting Older
Consumers 2024-2025: A Report of the Federal Trade Commission at 28
(December 1, 2025), <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/P144400-OlderAdultsReportDec2025.pdf">https://www.ftc.gov/system/files/ftc_gov/pdf/P144400-OlderAdultsReportDec2025.pdf</a> (``FTC Protecting Older
Consumers''). The actual magnitude of fraud losses is challenging to
estimate due to underreporting. See, e.g., Rachel E. Morgan &
Susannah N. Tapp, Examining Financial Fraud Against Older Adults,
Nat'l Inst. of Justice J. (March 20, 2024) (citing data on fraud
against older adults, but noting that ``the actual number of fraud
cases is unknown as many people do not report their victimization,
and underreporting is especially high for older adults''); U.S.
Department of the Treasury's Financial Crimes Enforcement Network
(``FinCEN''), FIN-2022-A002: Advisory on Elder Financial
Exploitation at 1-2 (June 15, 2022) (``FinCEN 2022 Advisory'')
(``Despite the fact that [elder financial exploitation] is the most
common form of elder abuse, the majority of incidents go
unidentified and unreported as victims may choose not to come
forward out of fear, embarrassment, or lack of resources.'').
\10\ See FBI IC3, FBI internet Crime Report 2025 at 6 (``FBI IC3
Report''). This represents a 59 percent increase in losses from
2024.
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For senior investors, fraud losses can be 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 frequently 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 financial
exploitation.
While the impact of fraud can be devastating for senior investors
as a group, the threat of fraud extends across all age demographics and
is growing at an alarming pace.\11\ The FTC estimated overall fraud
losses in 2024, adjusted to account for underreporting, at $195.9
billion.\12\ The FBI IC3 had a record-breaking $20.877 billion in
reported fraud losses in 2025, representing a 26 percent increase from
2024.\13\ Globally, consumers lost over $1 trillion to scams in
2024.\14\
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\11\ For example, FTC data show that median losses are highest
for older adults, but individuals under age 60 accounted for 64
percent of reported fraud in 2024. See FTC Protecting Older
Consumers, supra note 9, at 18; see also FTC, Consumer Sentinel
Network Data Book 2024 (March 2025) (``FTC 2024 Data Book''). The
FTC's Consumer Sentinel data are available online in an interactive
format.
\12\ See FTC Protecting Older Consumers, supra note 9, at 28.
\13\ See FBI IC3 Report, supra note 10.
\14\ Sam Rogers, International Scammers Steal Over $1 Trillion
in 12 Months in Global State of Scams Report 2024, Global Anti-Scam
Alliance (November 7, 2024).
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Criminal perpetrators employ increasingly sophisticated tactics
using technology and artificial intelligence (``AI''), making it more
difficult for both member firms and investors to identify scams.\15\
These advances have contributed to the rapid evolution and
proliferation of fraud schemes that can victimize investors regardless
of age, capacity or sophistication.\16\
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\15\ See, e.g., FBI, Alert Number: I-120324-PSA: Criminals Use
Generative Artificial Intelligence to Facilitate Financial Fraud
(December 3, 2024).
\16\ See, e.g., FBI IC3 Report, supra note 10, at 3 (``It has
never been more important to be diligent with your cybersecurity,
social media footprint, and electronic interactions. Cyber threats
and cyber-enabled crime will continue to evolve as the world
embraces emerging technologies such as artificial intelligence.'');
INTERPOL, INTERPOL Global Financial Fraud Threat Assessment at 17
(March 2026) (``The proliferation of AI-driven tools, large language
models (``LLMs''), cryptocurrencies, and the rapid expansion of the
Fraud-as-a-service (``FaaS'') platforms have collectively lowered
barriers to entry, enabling widespread access to sophisticated fraud
capabilities, elevating the generation of financial gain through
fraud schemes to an efficient, global industry.'').
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C. Overview of Proposed Rule Changes
In light of these evolving threats and based on extensive
engagement with member firms and other interested parties, FINRA is
filing this proposed rule change to make additional fraud prevention
tools available for all customers. As discussed in more detail below,
FINRA is proposing:
<bullet> Amendments to Rule 4512 (Customer Account Information)
[[Page 57409]]
designed to increase adoption and effectiveness of trusted contacts, by
permitting member firms to use the alternative term ``emergency
contact'' and to provide additional flexibility for a customer to name
a trusted or emergency contact for use across all the customer's
accounts at the member firm;
<bullet> Amendments to Rule 2165 (Financial Exploitation of
Specified Adults) to extend the maximum temporary hold period under
Rule 2165 from 55 business days to 145 business days, in three 30-
business day increments, subject to safeguards, along with additional
modifications that provide enhanced clarity and flexibility; and
<bullet> New Rule 2166 (Temporary Delays for Suspected Fraud) to
offer member firms a separate safe harbor framework, modeled on
existing Rule 2165, to protect all customers (irrespective of age or
capacity) from suspected fraud, by permitting a temporary delay of up
to 10 business days on disbursements or transactions when there is a
reasonable belief of fraud. The addition of proposed new Rule 2166
would also require a conforming amendment to Rule 0150 (Application of
Rules to Exempted Securities Except Municipal Securities).
II. Proposed Amendments To Rule 4512
A. Enabling Use of the Alternate Term ``Emergency Contact''
The proposed addition of new paragraph (e) of Rule 4512.06 would
give member firms the option to use the term ``emergency contact'' as
an alternative to ``trusted contact person.'' FINRA believes that
providing member firms the flexibility to use the term ``emergency
contact'' as an alternative to ``trusted contact person'' would clarify
the role for customers who are unfamiliar with the term ``trusted
contact person'' and potentially increase use of this tool. Member
firms' written supervisory procedures and training materials would need
to reflect that the terms have the same meaning and obligations.
B. Providing Additional Flexibility in Naming a Trusted Contact Person
for All Accounts
The trusted contact provisions are part of Rule 4512 and apply to
each non-institutional customer account. FINRA has previously provided
guidance permitting a member firm to seek to obtain trusted contact
person information collectively where a customer has more than one
account (e.g., in one update letter for all the customer's accounts),
provided that each of the affected accounts is clearly identified to
the customer.\17\
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\17\ See FINRA Seniors FAQs, supra note 7, at Q.4.5.
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To provide additional flexibility, FINRA is proposing to expand
this guidance in proposed new paragraph (d) of Rule 4512.06. This would
permit member firms to seek the customer's authorization to apply a
trusted contact person to all of the customer's existing and future
accounts with the member firm, provided that the customer is also
offered the choice to assign the trusted contact person on an account-
by-account basis rather than to all accounts.
C. Clarifying and Other Ministerial Changes
As a ministerial matter, the proposed amendments delete from Rule
4512.06(a) a transitional provision that addressed the application of
the trusted contact requirement to accounts that were opened pursuant
to a prior rule. Due to the passage of time, this provision is no
longer needed.
In addition, to clarify that member firms are permitted to obtain
more than one trusted contact person, FINRA proposes a minor addition
to Supplementary Material .06 to clarify that nothing in the rule shall
prevent a member from obtaining more than one trusted contact person
from a customer.\18\
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\18\ For example, Rule 2165 expressly includes reference to
plural ``Trusted Contact Person(s).'' See Rule 2165(b)(1)(B)(ii).
See also, e.g., SEC, FINRA, & NASAA, Investor Bulletin: Why You
Should Consider Adding a Trusted Contact to Your Account (August 25,
2025), <a href="https://www.finra.org/investors/insights/trusted-contact">https://www.finra.org/investors/insights/trusted-contact</a> (``A
trusted contact person must be age 18 or older. They may be a family
member, close friend, attorney, accountant or another third party
you believe would respect your privacy and be willing to help. You
may also choose to add more than one trusted contact to your
account. Finally, you may change your trusted contact in your
account as often as you wish.'') (emphasis added).
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III. Proposed Amendments to Rule 2165
A. Proposed Changes To Extend the Maximum Temporary Hold Period
FINRA is proposing a structured framework for extending temporary
holds beyond the current 55-business-day maximum, by adding three 30-
business-day extensions to a new maximum of 145 business days (unless
otherwise terminated or extended by the relevant authority) in proposed
Rule 2165(b)(5). While many financial exploitation situations are
resolved within the existing framework of the rule, these additional
extensions are designed to be used in those limited circumstances where
Adult Protective Services (``APS''), law enforcement, and other
relevant agencies and regulators may need additional time to assess
referrals, determine whether to investigate, and communicate to member
firms that additional time will be needed to investigate or resolve the
matter.\19\
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\19\ See supra note 8 and accompanying text.
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The new structured framework would impose measured conditions and
other safeguards to prevent inappropriate extensions of a temporary
hold. The ability to extend for each 30-business-day period would be
conditioned on the member firm making reasonable follow-up efforts with
the relevant authority regarding the status of the reported matter; not
having received a response; \20\ and continuing to have a reasonable
belief of financial exploitation.\21\
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\20\ An automated response or acknowledgement or other
communication that does not address the status of the referral would
not be considered a response for these purposes.
\21\ Proposed Rule 2165(b)(5)(A).
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The first extension beyond 55 business days would require
notification, which may be oral, to all parties authorized to transact
business on the account and to the trusted contact person(s) (subject
to certain exceptions).\22\ These individuals would need to be notified
of the extension, the reason for and potential duration of the
extension, and how the member firm can be contacted for questions or
concerns.\23\
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\22\ Proposed Rule 2165(b)(5)(B) (stating that members must
``provide notification of the extension of the temporary hold, the
reason for the extension, and the potential for the extension to
last 90 business days'' to the trusted contact person(s) and all
parties authorized to transact business on the account, unless a
party is unavailable or the member reasonably believes that the
party has engaged, is engaged, or will engage in the financial
exploitation of the Specified Adult).
\23\ Currently, Rule 2165 requires notification of the hold and
the reason for the hold to authorized parties and the trusted
contact person within two business days of placing the hold. FINRA
is proposing to amend this requirement to also require information
about how the member can be contacted for questions or concerns. See
proposed Rule 2165.06.
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The amendment would also require documentation associated with any
additional extension, including the documentation of follow-up efforts,
the lack of a response from the relevant regulator or agency of
competent jurisdiction or court of competent jurisdiction, and the
member's continuing belief of financial exploitation.\24\ In accordance
with
[[Page 57410]]
proposed Rule 2165.05, documentation of follow-up efforts with the
relevant regulator, agency or court of competent jurisdiction ``shall
include dates of communication attempts, methods used, and any
communications received.'' \25\ Member firms would also be required to
maintain records demonstrating that they made reasonable efforts to
determine the status of the referred matter.\26\ As discussed below, at
any time, if the relevant authority requests an extension, the member
firm would be permitted to continue the hold outside of the structured
time periods.\27\
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\24\ Proposed Rule 2165(d)(7). In circumstances where the member
receives no communication from the relevant authority, documentation
of a lack of response could include a notation or attestation that
no response was received from the relevant authority as of a
specified date.
\25\ Proposed Rule 2165.05.
\26\ See supra note 25.
\27\ See proposed Rule 2165(b)(2)-(4) (``unless otherwise
terminated or extended by a federal or state regulator or agency of
competent jurisdiction or a court of competent jurisdiction'') and
proposed Rule 2165.04; see infra Item II.A.1.III.D.
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This balanced approach provides for longer holds in complex cases
while maintaining the integrity of the existing temporary hold
framework through a clearly defined process.
B. Reporting Financial Exploitation To Federal Authorities
Currently, Rule 2165 permits a temporary hold to be extended if the
member firm has provided notification of the member firm's reasonable
belief of financial exploitation to a state regulator or agency of
competent jurisdiction or a court of competent jurisdiction. In
recognition of the multi-jurisdictional nature of many instances of
financial exploitation and potential avenues at the federal level for
investigation and redress, FINRA proposes to expand existing references
in Rule 2165(b)(2)-(4) and 2165(d) to expressly include a federal
regulator or federal agency of competent jurisdiction, and include
these references in the proposed new provisions.\28\
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\28\ See, e.g., Board of Governors of the Federal Reserve System
et al., Interagency Statement on Elder Financial Exploitation at 7
(December 2024) (``Some agencies or programs may be able to help
victims recover stolen funds. For example, the IC3 Recovery Asset
Team is a domestic program designed to `streamline communication
between financial institutions and assist FBI field offices with the
freezing of funds for those who made transfers to fraudulent
accounts under false pretenses.' Another example is FinCEN's
international Rapid Response Program that `helps victims and their
financial institutions recover funds stolen as the result of certain
cyber-enabled financial crime schemes, including business email
compromise.' '') (citations omitted).
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C. Individuals Authorized To Place, Extend or Terminate a Hold
Pursuant to existing Rule 2165(c)(2), a member firm's written
supervisory procedures must identify the title of each person
authorized to place, terminate or extend a temporary hold on behalf of
the member firm. Such individuals must be associated persons who serve
in a supervisory, compliance or legal capacity for the member firm.
To facilitate the administration of the temporary hold provisions
by member firm personnel who do not serve in a supervisory, compliance
or legal capacity but who have relevant expertise and day-to-day
responsibilities, FINRA proposes a limited expansion of the types of
individuals whom a member firm can authorize to place, terminate or
extend a temporary hold. The proposed addition of Rule 2165(c)(2)(B)
would cover associated persons who serve in ``a specialized senior
investor protection or fraud prevention role with responsibilities that
include, as appropriate, investigating, evaluating, escalating, and
reporting potential financial exploitation of Specified Adults.''
D. Codifying Guidance Articulated in Frequently Asked Questions
For clarity, FINRA proposes to largely codify existing guidance
articulated in two Frequently Asked Questions (``FAQs''). First,
pursuant to proposed Supplementary Material .04, a member firm may
extend a temporary hold beyond the periods specified in Rule 2165 upon
the request of a federal or state regulator or agency of competent
jurisdiction or court of competent jurisdiction, and that request need
not be in the form of a formal order or in writing,\29\ so long as the
member firm maintains a record of the authority's request.\30\
Accordingly, if a relevant authority indicates to a member firm, by
telephone, email or otherwise, that additional time is needed to
address a reported matter, the member firm may extend the hold and
retain a record of the request.
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\29\ To the extent a member receives an oral request from the
relevant authority, the member would be expected to create a record
of such communication and maintain it in accordance with proposed
Rule 2165.04.
\30\ See FINRA Seniors FAQs, supra note 7, at Q.3.2 (``May a
member extend a temporary hold beyond the period indicated in Rule
2165 if a state agency, such as adult protective services,
securities regulator, or other state agency or regulator, asks a
member to extend a temporary hold so that it has more time to
investigate the matter or does the state agency need to issue a
formal order? In addition, would the member need to report the
agency's request to FINRA? Rule 2165 allows a member to extend a
temporary hold upon a state agency's request to do so. The state
agency would not have to issue a formal order. In addition, Rule
2165 does not require a member to report a state agency's request to
FINRA. However, the member would need to maintain a record of the
state agency's request.'').
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Second, pursuant to proposed Supplementary Material .07, a member
firm may place restrictions on an entire account rather than a
particular disbursement or transaction when the member firm has a
reasonable belief of financial exploitation, has procedures reasonably
designed to permit legitimate transactions and disbursements (e.g.,
regular bill payments), and permits such legitimate transactions or
disbursements.\31\ The provision makes clear that a member firm may not
avail itself of the Rule 2165 safe harbor if it blocks transactions or
disbursements where there is not a reasonable belief of financial
exploitation regarding such transactions or disbursements.\32\
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\31\ See FINRA Seniors FAQs, supra note 7, at Q.1.2. (``Under
Rule 2165, may a member that has a reasonable belief of financial
exploitation of a Specified Adult regarding a transaction or
disbursement place a temporary hold or restrictions on an entire
account if the member permits legitimate disbursements from the
account? Where a questionable transaction or disbursement involves
less than all assets in an account, a member should not place a
blanket hold on the entire account. Each transaction or disbursement
should be analyzed separately. In addition, where a transaction or
disbursement at issue involves all of the assets of the account
(e.g., an ACATS transfer request), the member must permit
transactions or disbursements from the account where there is not a
reasonable belief of financial exploitation regarding such
disbursements (e.g., regular bill payments). FINRA understands that
some members intend, for operational reasons, to place a temporary
hold or restrictions on an entire account when they have a
reasonable belief of financial exploitation regarding a transaction
or disbursement from the account, but also intend to permit
legitimate transaction or disbursement from the account in these
circumstances. FINRA believes that placing a temporary hold or
restrictions on an entire account but allowing legitimate
transactions or disbursements from the account is consistent with
Rule 2165 and members may proceed in such a manner as long as they
have procedures reasonably designed to permit legitimate
transactions and disbursements. FINRA emphasizes that a member may
not avail itself of the Rule 2165 safe harbor if it blocks
transactions or disbursements where there is not a reasonable belief
of financial exploitation regarding such transactions or
disbursements.'').
\32\ See proposed Rule 2165.07.
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E. Protection of Customer Assets
FINRA recognizes that member firms may hold crypto assets for
customers, such as payment stablecoins regulated by the GENIUS Act.\33\
FINRA therefore proposes to change the current terminology of ``funds
or securities'' to ``funds, securities, or other assets'' throughout
Rule 2165, and use this same terminology in proposed Rule 2166
(discussed below), to clarify that Rule 2165 and proposed Rule 2166
would permit member firms to protect any customer assets that may be
held
[[Page 57411]]
with the member, including payment stablecoins.
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\33\ See Guiding and Establishing National Innovation for U.S.
Stablecoins Act, Public Law 119-27, 139 Stat. 419 (2025)
(establishing federal guidelines for the use of stablecoins in
financial markets).
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IV. Proposed New Rule 2166
A. Background
The proliferation of fraud and scams targeting individuals of all
ages and the evolution of fraud tactics have heightened a need for
protective measures that extend beyond the current Specified Adult
criteria in Rule 2165. To offer member firms a tool to protect all
customers (regardless of age or capacity) from fraud, FINRA is
proposing to adopt new Rule 2166.
Proposed Rule 2166 is modeled on Rule 2165 and similarly offers an
optional safe harbor approach--but in a more streamlined fashion--with
a ``speed bump'' mechanism distinct from the longer-term holds
available under Rule 2165 for Specified Adults. Specifically, proposed
Rule 2166 would permit a member firm to place a temporary delay of up
to 10 business days on a transaction or disbursement in the account of
a customer \34\ if there is a reasonable belief of fraud \35\ targeting
the customer, with associated safeguards.\36\
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\34\ For purposes of this rule, ``customer'' would mean ``a
natural person age 18 and older.'' Proposed Rule 2166(a)(2).
``Account'' would mean ``any account of a member for which a
customer has the authority to transact business.'' Proposed Rule
2166(a)(1). Customers who meet the definition of ``Specified Adult''
under Rule 2165 may be protected by a member under either Rule 2165
or proposed Rule 2166. FINRA notes that a ``mental or physical
impairment that renders the individual unable to protect his or her
own interests'' can apply to temporary impairments (e.g., due to
addiction or temporary illness) as well as permanent or chronic
impairments. See Securities Exchange Act Release No. 79215 (November
1, 2016), 81 FR 78238, 78246 (November 7, 2016) (Notice of Filing of
File No. SR-FINRA-2016-039). In the context of placing a temporary
delay in the account of a customer under the age of 65, if the
member forms a reasonable belief that the customer has such a mental
or physical impairment, the member could choose to rely instead on
Rule 2165.
\35\ For purposes of this rule, ``fraud'' would be defined as
``a deceptive scheme perpetrated by a third party that targets a
customer and results in a request for a disbursement of funds,
securities, or other assets or a transaction in securities based on
false or misleading information.'' Proposed Rule 2166(a)(4).
\36\ Like Rule 2165, proposed Rule 2166 would provide members
and their associated persons with a safe harbor from FINRA Rules
2010, 2150 and 11870 when acting in accordance with the requirements
of the rule.
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Proposed Rule 2166 is designed to prevent customer losses by giving
member firms a brief intervention window to facilitate outreach by the
member firm to the customer (away from perpetrator influence). This
brief intervention window would also facilitate outreach by the member
firm to authorized parties and trusted contact persons, if the member
chooses to do so. Further, it would facilitate information gathering,
conversation and provision of relevant educational resources about
fraud schemes. During that intervention window, a member firm could
attempt to persuade the customer to recognize the attempted fraud and
not proceed with the transaction or disbursement.
The FBI explains that ``[o]ne of the most common tactics scammers
employ is a false sense of urgency or isolation'' and for this reason,
the FBI ``urges the public to `Take A Beat': resist pressure to act
quickly, pause for a moment, and assess the situation.'' \37\ Using a
permissible ``speed bump'' or ``cooling off period'' of this type is
consistent with this FBI fraud and scam awareness campaign, and is
supported by research suggesting that emotional stimulus can increase
susceptibility to fraud.\38\ Other research indicates that awareness
about specific scams can help protect against financial loss.\39\
Accordingly, the ability to pause a transaction or disbursement and
educate the customer about the specific type of suspected fraud or scam
could help prevent fraud losses. FINRA offers a set of resources in its
online Member Firm Hub, including Investor Education Resources and Scam
Prevention & Assistance Resources.\40\ These Key Topic pages provide
consolidated resources that member firms and registered professionals
can use or share with their customers.
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\37\ See FBI, FBI Announces Nationwide `Take A Beat' Campaign to
Increase Awareness of Frauds and Scams (August 19, 2024) (noting
that perpetrators ``may try to instill trust, induce empathy, or
fear, or promise monetary gains, companionship, or employment
opportunities--all to lure victims into immediate action.'').
\38\ See Katharina Kircanski et al., Emotional Arousal May
Increase Susceptibility to Fraud in Older and Younger Adults, 33(2)
Psychol. & Aging 325-337 (March 2018) (``Persuasion tactics used by
fraud perpetrators often elicit high levels of emotional arousal;
thus, studying emotional arousal may help to identify the conditions
under which individuals are particularly susceptible to fraud. We
examined whether inducing high-arousal positive (``HAP'') and high-
arousal negative (``HAN'') emotions increased susceptibility to
fraud. . . . For participants who exhibited the intended induced
emotional arousal, both the HAP and HAN conditions . . .
significantly increased participants' reported intention to purchase
falsely advertised items.'').
\39\ See Marguerite DeLiema, Yiting Li & Gary Mottola,
Correlates of responding to and becoming victimized by fraud:
Examining risk factors by scam type, 47(3) Int'l J. of Consumer
Stud. 1042-1059 (May 2023) (``Using survey data from 1375 American
and Canadian consumers who previously reported a scam to a North
American consumer complaint organization, this study examines the
correlates of responding to and losing money to four categories of
consumer fraud: opportunity-based scams, threat-based scams,
consumer purchase scams, and phishing scams. . . . Having advance
knowledge of fraud prior to being exposed was protective across
nearly all scam types. Results suggest that awareness about specific
scams helps protect against financial loss.'').
\40\ FINRA, Member Firm Hub: Customer Resources, <a href="https://www.finra.org/member-firm-hub">https://www.finra.org/member-firm-hub</a>.
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B. Overview of Proposed New Rule 2166, Including Key Safeguards
Proposed Rule 2166 establishes a ``speed bump'' mechanism, distinct
from the longer-term holds available under Rule 2165 for Specified
Adults, which would permit a member firm to place a temporary delay of
up to 10 business days on a transaction or disbursement in the account
of a customer if there is a reasonable belief of fraud targeting the
customer, with associated safeguards. The definition of ``fraud'' in
Proposed Rule 2166 is intended to be broad and would include, for
example, identity theft and account takeovers.\41\
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\41\ See supra note 35.
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The rule contains safeguards modeled on similar provisions in Rule
2165 to protect customers and prevent misapplication of the rule:
<bullet> Proposed Rule 2166(b)(1)(A): The member firm may only
place the temporary delay if the member firm reasonably believes that
fraud has occurred, is occurring, has been attempted, or will be
attempted.
<bullet> Proposed Rule 2166(b)(1)(B) and 2166.04: Not later than
two business days after placing a temporary delay, the member firm must
provide notification, which may be oral, to the customer \42\ of the
temporary delay, the reason for the delay, and how the member firm can
be contacted with questions or concerns.\43\ Member firms may choose to
also notify other authorized parties and trusted contact persons.
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\42\ Under Rule 2165, within two business days of placing a
hold, a member must notify all parties authorized on the account and
the trusted contact. See Rule 2165(b)(1)(B). For purposes of the
more streamlined approach in proposed Rule 2166, FINRA is proposing
to require notification to the customer, while permitting member
firms to choose whether to also notify other authorized parties or
trusted contact persons.
\43\ See proposed Rule 2166(b)(1)(B) and 2166.04. FINRA
understands that a member firm may not necessarily be able to speak
with or otherwise obtain a response from the customer within the
two-business-day period. Consistent with guidance provided in
connection with Rule 2165, FINRA would consider, for example, a
member firm's sending an email to a customer's email address on file
with the firm or placing a telephone call and leaving a message with
the customer within the two-business-day period to constitute
notification for purposes of proposed Rule 2166. See Regulatory
Notice 17-11 at n.20 (March 2017). A member firm may similarly mail
a letter, but due to the short duration of the temporary delay in
proposed Rule 2166, delivery by mail may not be the most expedient
means of communication.
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<bullet> Proposed Rule 2166(b)(2): The temporary delay would expire
no later than 10 business days after the date that the member firm
first placed the temporary delay, unless otherwise
[[Page 57412]]
terminated or extended by a federal or state regulator or agency of
competent jurisdiction or a court of competent jurisdiction.
<bullet> Proposed Rule 2166(c) and 2166.02: The rule would impose
supervision and training requirements consistent with Rule 2165 (as
proposed to be amended).
<bullet> Proposed Rule 2166(d): The records requirement would be
generally consistent with Rule 2165(d) (as proposed to be amended).\44\
Proposed Rule 2166(d) would require member firms to retain records of
requests for disbursements or transactions that may constitute fraud
and the resulting temporary delay, the basis for the reasonable belief
of fraud, the name and title of the associated person who authorized
the temporary delay, notification to relevant parties, any information
provided to the customer in connection with the temporary delay, and
information regarding any communications with or by a federal or state
regulator or agency or court of competent jurisdiction.
---------------------------------------------------------------------------
\44\ Proposed Rule 2166(d) would not include the specific
records requirements that are related to unique aspects of Rule 2165
concerning internal review and extensions of the temporary hold
period.
---------------------------------------------------------------------------
Proposed Rule 2166 seeks to balance investor protection with
respect for customer autonomy. It complements Rule 2165 by addressing
situations where customers of any age and capacity are targeted by
fraud. The differences between Rule 2165 and proposed Rule 2166
recognize that there are some factors that may be unique to senior
investors, such as the existence of agencies focused on combating
financial exploitation of seniors (e.g., APS). The longer hold periods
in Rule 2165 provide the member firm with the time needed to gather
information that can form the basis of a referral to such agency, and
the time an agency may need to evaluate the matter and conduct its
investigation. The length of the Rule 2165 hold period also recognizes
the severity of the consequences for seniors who experience financial
exploitation, as discussed above. Those same considerations and
resources do not necessarily exist for fraud perpetrated on other types
of investors.\45\
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\45\ Under both Rule 2165 and proposed Rule 2166, member firms
have the ability to coordinate with relevant parties, as
appropriate, to prevent or address customer harm. In addition,
Section 314(b) of the USA PATRIOT Act and its implementing
regulation provide financial institutions with the ability, upon
providing notice to the U.S. Department of the Treasury, to share
information with one another, under a safe harbor that offers
protections from liability, for purposes of identifying and, where
appropriate, reporting activities that may involve possible
terrorist activity or money laundering, which may include
information about fraud and other specified unlawful activities. See
31 CFR 1010.540 (Voluntary information sharing among financial
institutions) regarding the requirements that must be met to qualify
for the safe harbor from liability. In June 2026, FinCEN issued
updated guidance on information sharing under Section 314(b) through
a fact sheet that further clarified: (1) the permissibility of real-
time information sharing under Section 314(b) of the USA PATRIOT
Act; (2) under what circumstances information, including related to
fraud, can be shared; and (3) how information can be shared. See
FinCEN, Section 314(b) Fact Sheet (June 12, 2026), <a href="https://www.fincen.gov/system/files/shared/314bfactsheet.pdf">https://www.fincen.gov/system/files/shared/314bfactsheet.pdf</a>. See also supra
note 28; FinCEN Rapid Response Program Fact Sheet (April 15, 2026),
<a href="https://www.fincen.gov/system/files/2026-04/RRPFactSheet.pdf">https://www.fincen.gov/system/files/2026-04/RRPFactSheet.pdf</a>; FBI
Cyber, International Kill Chain Process, <a href="https://www.justice.gov/elderjustice/media/1364056/dl?inline">https://www.justice.gov/elderjustice/media/1364056/dl?inline</a>.
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C. Applying Proposed New Rule 2166 in Practice
FINRA understands that some member firms currently rely on
contractual provisions in their account opening agreements to place
holds on transactions or disbursements to protect customers from fraud.
In some cases, these holds may exceed 10 business days. The optional
safe harbor under proposed Rule 2166 would offer a structured framework
for member firms (including those that do not currently have such
contractual provisions) under FINRA rules, without restricting a member
firm's ability to pursue contractual approaches.\46\
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\46\ See also Regulatory Notice 22-05 at n.13 (February 2022)
(``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.' '') (citing SEC, Staff Bulletin: Risks
Associated with Omnibus Accounts Transacting in Low-Priced
Securities (last updated October 17, 2023)).
---------------------------------------------------------------------------
As with Rule 2165, Supplementary Material .01 to proposed Rule 2166
makes clear that the rule does not require member firms to place
temporary delays.\47\
---------------------------------------------------------------------------
\47\ See proposed Rule 2166.01.
---------------------------------------------------------------------------
Consistent with proposed Supplementary Material .07 in Rule 2165,
pursuant to Supplementary Material .05 in proposed Rule 2166, a member
firm may place restrictions on an entire account rather than a
particular disbursement or transaction when the member firm has a
reasonable belief of fraud regarding a transaction or disbursement from
the account, has procedures reasonably designed to permit legitimate
transactions and disbursements (e.g., regular bill payments), and
permits such legitimate transactions or disbursements from the account
in these circumstances. The provision makes clear that the member firm
may not rely on the safe harbor if it blocks transactions or
disbursements where there is not a reasonable belief of fraud regarding
such transactions or disbursements.
V. Conforming Change To Rule 0150
FINRA proposes amending Rule 0150(c) to add proposed new Rule 2166
to the list of rules applicable to transactions in, and business
activities relating to, exempted securities, except municipal
securities, conducted by member firms and associated persons.
If the Commission approves the proposed rule change, FINRA will
announce the effective date of the proposed rule change in a Regulatory
Notice.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\48\ which requires, among
other things, that FINRA rules 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.
---------------------------------------------------------------------------
\48\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------
The proposed rule changes are designed to enhance member firms'
ability to prevent and address financial exploitation of senior and
vulnerable investors and fraud impacting investors of all ages.
The proposed changes to Rule 4512, including the ability for member
firms to use the term ``emergency contact'' as an alternative to
``trusted contact person,'' aim to increase customer understanding and
adoption of this safeguard to help protect investors from fraud and
financial exploitation, help member firms update contact information
when a customer becomes unavailable, assist when concerns arise over
possible diminished capacity or other health issues, and protect
assets.
The proposed limited expansion of the time period in Rule 2165
would allow additional time for APS agencies, law enforcement, and
state and federal regulators to assess referrals of suspected financial
exploitation, determine whether to investigate, and, where relevant,
communicate to member firms that additional time will be needed to
investigate or resolve a matter. The additional proposed changes to
Rule 2165 are intended to provide member firms clarity and flexibility
in applying this critical investor protection tool. Ultimately, the
purpose of these proposed changes is to further empower member firms to
help
[[Page 57413]]
protect senior and vulnerable investors from experiencing unrecoverable
losses due to financial exploitation.
Proposed new Rule 2166 is designed to provide member firms with an
additional investor protection tool that would be available to any
customer, regardless of age or capacity. The proposed new rule would
enable member firms to place temporary delays of up to 10 business days
on transactions and disbursements where there is a reasonable belief of
fraud, during which time member firms can communicate with customers to
alert them of suspected fraud and ultimately prevent unrecoverable
fraud losses from occurring.
The proposed rule changes incorporate numerous conditions and
important safeguards that apply to each temporary hold or delay and are
designed to protect investors against misapplication of the rules.
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 analyze the economic baseline for the proposed rule change
and their potentially significant economic impacts, including
anticipated costs and benefits, relative to the baseline, and the
alternatives considered in assessing how best to meet FINRA's
regulatory objectives.
(a) Regulatory Need
Advances in technology and use of sophisticated tactics have made
fraud a significant and growing risk for investors and member firms.
While investors of all ages face a significant risk of fraud, senior
investors are often living on fixed incomes and budgets without the
ability to offset significant losses over time. The proposed rule
amendments would enhance the tools that member firms have to fight
fraud and financial exploitation of senior and vulnerable adult
investors, and to protect other investors where there is a reasonable
suspicion of fraud.
(b) Economic Baseline
The economic baseline includes current Rules 4512 and 2165, which
assist member firms in protecting customer assets through trusted
contact persons and, for Specified Adults, the ability to place
temporary holds on disbursements and transactions when there is a
reasonable belief of financial exploitation. The economic baseline also
includes current industry practices relating to compliance with these
provisions and relevant state laws as well as current risks of fraud
and financial exploitation of individuals who are not Specified Adults.
The proposed rule change would mostly affect member firms with retail
operations. As of December 31, 2025, there are at least 1,088 member
firms that serve retail investors.
Survey data from FINRA's current National Financial Capability
Study Report indicate that about 42 percent of investors have
authorized a trusted contact person for their investment accounts.\49\
Among those investors who do not have a trusted contact person, 81
percent do not recall being asked to name one and 49 percent indicated
that they would be willing to do so.\50\
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\49\ See National Financial Capability Study, supra note 4, at
21.
\50\ See National Financial Capability Study, supra note 4, at
22.
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Regarding temporary holds, FINRA conducted a survey of member firms
in 2020. At that time, FINRA found that ``[a]pproximately 53 percent of
survey respondents stated that they had been unable to resolve a matter
within the 25-business day period.'' \51\ Furthermore, ``[f]or matters
that took longer to resolve than the 25-business day period,
approximately 35 percent of survey respondents indicated that it took
on average 26-50 days to resolve the matter and approximately 59
percent of survey respondents indicated that it took on average 51-100
days to resolve the matter.'' \52\
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\51\ See Regulatory Notice 20-34 at 5 (October 5, 2020).
\52\ See supra note 51.
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(c) Economic Impacts
The proposed amendments would impact member firms and investors,
especially senior and vulnerable investors. As discussed above, FINRA
is proposing amendments in three areas: (1) amendments to Rule 4512,
allowing the use of ``emergency contact'' terminology under the
existing trusted contact framework to reduce customer confusion, and
codifying existing guidance; (2) amendments to Rule 2165, including
extending maximum temporary hold periods and codifying existing
guidance; and (3) proposing new Rule 2166 that introduces a new
temporary delay mechanism for addressing suspected fraud, applicable to
any customer (regardless of age or capacity).
Anticipated Benefits
FINRA believes that the proposed rule change to Rule 4512 allowing
the use of the term ``emergency contact'' as an alternative to
``trusted contact person'' would increase customer comfort with
designating an individual as a trusted contact person. FINRA also
believes that an increase in customer use of this designation would
improve member firms' ability to intervene in situations of suspected
fraud or other circumstances of potential investor harm. This would
subsequently improve the chances to prevent potential financial losses
to investors.
FINRA believes that the proposed rule change to Rule 2165 would
better address the fact that, in a significant number of instances,
relevant authorities, such as APS or law enforcement, require more than
the current maximum of 55 business days to evaluate or address
financial matters. The data from the 2020 FINRA member firm survey
discussed above suggest that about 28 percent of member firms face
instances where a matter took more than 50 days to resolve. The data
also suggest that the majority of matters are resolved within the
current maximum of 55 business days.
The proposed rule change would establish a structured framework to
extend temporary holds up to a maximum of 145 business days (absent
further extension by the relevant authority) and provide a mechanism
whereby the extension of a hold is commensurate to the circumstances.
The more flexible structured framework is expected to benefit investors
by allowing, when needed, for more time to address situations where
fraud or other circumstances of potential investor harm may be
occurring. The proposed rule change strikes a balance between
addressing circumstances where there is a demonstrated need for longer
holds and avoiding overly long holds or misuse.
The newly proposed Rule 2166 would expand temporary hold
protections to cover not only senior and vulnerable investors, but all
investors. It would do so by introducing an optional safe harbor for
member firms to place a temporary delay of up to 10 business days on
disbursements or transactions when there is a reasonable belief of
fraud targeting a customer, without restricting a member firm's ability
to include contractual provisions in their account opening agreements
to place holds or delays to protect customers from fraud. The proposed
rule change
[[Page 57414]]
would benefit investors by allowing member firms to intervene in
situations of suspected fraud and thereby potentially prevent financial
losses to investors, especially if relevant information can be
effectively communicated to investors within 10 business days.
Accordingly, the expected benefits from the proposed rule change would
be greatest where the member firm maintains awareness of common fraud
schemes and knows the customer, including how to effectively
communicate with them. The proposed rule change benefits member firms
by providing them with safe harbor protection from specified FINRA
rules if they meet the terms of the rule when implementing a delay of
up to 10 business days on disbursements or transactions.
Anticipated Costs
Allowing member firms to use the term ``emergency contact'' as an
alternative to ``trusted contact person'' would result in negligible
additional costs if they choose to use the ``emergency contact''
terminology. Member firms may incur some minor costs in updating
materials that reference ``trusted contact person,'' such as written
supervisory procedures, training materials and account opening
agreements.
To the extent that member firms choose to take advantage of the
proposed amendments to Rule 2165 as well as proposed Rule 2166,
additional operational costs such as additional personnel time for
communicating with relevant authorities, notifying relevant parties of
hold extensions or temporary delays, and enhanced recordkeeping efforts
may result. Additionally, member firms would need to update their
written supervisory procedures and develop training programs to
implement the new provisions.
In addition, there could be indirect costs to member firms and
investors in situations where longer temporary holds under Rule 2165 or
Rule 2166-based delays are implemented. The possibility exists that the
imposition of a temporary hold or delay might cause lost or diminished
investment opportunities and dissatisfaction with customer service by
some investors. These costs would likely increase with the length of
time of the hold. Some investors may view temporary holds or delays as
impositions on their autonomy that exceed any benefits resulting from
better fraud protection. In some instances, this may prompt some
investors to move assets, which would impose costs on them. For member
firms, this could result in lost business and diminished client
relationships. In addition, if time-sensitive disbursements or
transactions are affected by such holds or delays, there may be missed
opportunities or other disruptions to the investor. While acknowledging
the possibility of member firms and investors incurring the various
indirect costs discussed above, FINRA is unable to gauge their
magnitude.
Conversely, in situations where proposed Rule 2166 would apply but
member firms choose not to place a temporary delay, there is the
possibility that member firms expose themselves to the risk of customer
complaints and legal action. FINRA believes that a legal risk exists
whether or not FINRA adopts the proposed rule, and the safe harbor
approach appropriately balances investor protection with member firm
liability concerns when member firms act in good faith.
Competitive Effects
FINRA believes the competitive effects of the potential amendments
would differ across the impacted member firms, depending on their
business model and composition of their customer base and whether and
to what extent they choose to use the tools the proposed rule change
offer. For example, the competitive effects from the proposed rule
change would depend in part on the extent to which a member firm
already has business practices in place that facilitate the detection
of potential fraud and responses to it. The ability to introduce a 10-
business-day delay, based on proposed Rule 2166, may be more useful to
member firms with full-service business models than to others. Some
member firms may not see much advantage from this additional tool and
may instead see mostly risks of additional customer complaints and
legal action. Other member firms that currently rely on contractual
agreements governing temporary holds (irrespective of customer age) may
be indifferent. To the extent that member firms make their practices
regarding these tools known to current and prospective customers,
member firms may attract additional investors for whom such practices
and protections are especially important and salient.
The competitive impact of the proposed rule change on member firms
versus non-member firms, such as investment advisory firms, is unclear.
(d) Alternatives Considered
With respect to the appropriate maximum length of delay under
proposed Rule 2166, FINRA considered whether five business days would
be preferable to 10 business days. With five business days, the
potential cost to the investor resulting from missed investment
opportunities could be reduced. However, a shorter maximum of five
business days would also decrease member firms' ability to collect
information, reach the customer, reach the trusted contact person or
other authorized parties (if the member firm chooses to), and possibly
schedule in-person meetings. Based on commenter feedback that a maximum
of five business days may be inadequate to allow member firms to
effectively make use of the ``speed bump,'' FINRA is proposing a 10-
business-day delay.
While FINRA is proposing to address financial exploitation of non-
Specified Adults through proposed Rule 2166, FINRA had alternatively
considered expanding existing Rule 2165 to cover non-Specified Adults.
Relative to expanding Rule 2165, the proposed approach avoids potential
disruption of existing member firm practices geared specifically to
Specified Adults. Moreover, while for Specified Adults there are
agencies with mandates to investigate financial exploitation (e.g.,
APS), the same is not necessarily true for fraud perpetrated on non-
Specified Adults.\53\ Hence, while the hold periods in Rule 2165
provide member firms the time needed to gather information that can
form the basis of a referral to such agencies, and the time an agency
may need to conduct its investigation, similar considerations do not
necessarily exist for non-Specified Adults.
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\53\ See supra note 45.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
In January 2026, FINRA published Regulatory Notice 26-02 (the
``Notice''), requesting comment on the proposed rule change (the
``Notice Proposal''). FINRA received 26 comments in response to the
Notice. A copy of the Notice is available on FINRA's website at <a href="http://www.finra.org">http://www.finra.org</a>. A list of the commenters in response to the Notice and
copies of the comment letters received in response to the Notice are
also available on FINRA's website.\54\
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\54\ See SR-FINRA-2026-018 (Form 19b-4, Exhibits 2b and 2c)
(available on FINRA's website at <a href="http://www.finra.org">http://www.finra.org</a>). For a list
of abbreviations assigned to commenters, see SR-FINRA-2026-018, Form
19b-4, Exhibit 2b.
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Most commenters expressed support for FINRA's efforts to provide
member firms with additional tools to protect senior and vulnerable
investors from financial exploitation and all investors from fraud;
however, some commenters
[[Page 57415]]
opposed aspects of the proposal. Several commenters supported
particular aspects of the Notice Proposal, including the proposed
amendments to the trusted contact person framework, the proposed
extension of the maximum temporary hold period under Rule 2165, and the
adoption of proposed Rule 2166. Some commenters requested
clarifications or modifications concerning, among other things, the
reasonable belief standard, the length and conditions of temporary
holds and delays, notification requirements, the use of trusted or
emergency contacts, the treatment of customer complaints arising from
temporary holds, the interaction of proposed Rule 2166 with contractual
hold authority and account transfer requirements, and customer redress
mechanisms. A summary of the comments and FINRA's response is set forth
below.
Trusted Contact Amendments Under Rule 4512
The proposed amendment to Rule 4512 would give member firms the
option to use the term ``emergency contact'' as an alternative to
``trusted contact person.'' This aspect of the proposal received nearly
universal support \55\ with only Pittsburgh Law Clinic opposing the
change and Long & Mierswa requesting additional flexibility for the use
of other similar terminology. For example, supporters stated that
customers may view ``trusted contact'' as akin to ``trustee,'' a term
that many associate with a loss of control over their account(s).\56\
In contrast, supporters agreed that the term ``emergency contact'' is
more universally understood than ``trusted contact person'' because
``emergency contact'' is known to many ``main street'' investors \57\
and often used in other contexts such as healthcare, employment and
education.\58\ Pittsburgh Law Clinic opposed this proposed amendment,
citing medical research showing patients routinely misunderstand
emergency medical contacts and assume they have decision-making
authority. Some commenters urged enhanced disclosure and more frequent
confirmation of trusted contact person information.\59\
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\55\ Apex; ASA; CAI; Cambridge; Cardozo Law Clinic; CFP, FPA &
NAPFA; Commonwealth; DFPG; Fidelity; FSI; Hicks & Loeffel; Long &
Mierswa; LPL; Mustico; NASAA; Robinhood; SIFMA; St. John's.
\56\ CFP, FPA & NAPFA; Long & Mierswa; St. John's.
\57\ ASA.
\58\ CFP, FPA & NAPFA; LPL; NASAA.
\59\ Cardozo Law Clinic; CFP, FPA & NAPFA; NASAA; PIABA.
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FINRA continues to believe that providing member firms the
flexibility to use the term ``emergency contact'' as an alternative to
``trusted contact person'' would address practical concerns raised by
member firms that some customers are unfamiliar with or hesitant about
the term ``trusted contact person.'' FINRA believes that permitting the
use of the term ``emergency contact'' would increase familiarity with
and use of this important tool. FINRA will continue to consider
additional ways to educate investors on this topic and encourages
member firms to do so as well.\60\
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\60\ FINRA notes that under Rule 4512.06, ``at the time of
account opening a member shall disclose in writing, which may be
electronic, to the customer that the member or an associated person
of the member is authorized to contact the trusted contact person
and disclose information about the customer's account to address
possible financial exploitation, to confirm the specifics of the
customer's current contact information, health status, or the
identity of any legal guardian, executor, trustee or holder of a
power of attorney, or as otherwise permitted by Rule 2165.'' Such
disclosure may also help to educate customers about the benefits of
naming a trusted contact.
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FINRA believes that permitting the use of two key terms: ``trusted
contact person'' and ``emergency contact'' would promote predictability
and increase familiarity with the role. FINRA does not believe
providing additional flexibility for the use of other terms is
appropriate at this time, as it could create confusion about the
trusted contact person's role and could have the unintended consequence
of decreasing familiarity with and use of this important tool.
Several commenters suggested that FINRA consider allowing firms to
request customers to designate more than one trusted contact person
because a single contact may be unavailable, unreachable or otherwise
unable to assist in some circumstances.\61\ To clarify that this is
permissible, FINRA has proposed a minor amendment to Rule 4512.06 as
described above.\62\
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\61\ See CFP, FPA & NAPFA; Mustico; NASAA.
\62\ See supra note 18 and accompanying text.
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The proposed amendment would also permit member firms to seek a
customer's authorization to apply a trusted contact person to such
customer's existing and future accounts with the member firm, provided
that the customer is offered the choice to assign the trusted contact
person on an account-by-account basis rather than to all accounts. This
aspect of the proposal also received strong support.\63\ For example,
DFPG stated that managing trusted contact person information on an
account-by-account basis can be operationally burdensome to member
firms and confusing and burdensome for customers, particularly as they
establish new accounts. DFPG further stated that allowing customers to
authorize the application of trusted contact person information to all
current and future accounts eases these burdens and maximizes trusted
contact coverage, thereby reducing the risk of fraud and exploitation.
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\63\ Apex; CAI; CFP, FPA & NAPFA; DFPG; Fidelity; FSI; Long &
Mierswa; LPL; PIABA; Robinhood; SIFMA; St. John's.
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While SIFMA supported the proposed flexibility for a customer to
name a trusted or emergency contact for use across all the customer's
accounts at the member firm, SIFMA requested that FINRA clarify that a
firm can choose whether to provide customers the option to appoint a
trusted contact person at either the customer or account level only.
SIFMA stated that requiring firms to adopt a hybrid approach on a
customer-by-customer basis could impose significant technological and
substantive challenges that could run counter to the purpose of this
change.
Proposed Supplementary Material .06(d) is intended to clarify
existing guidance and offer additional flexibility. Member firms may
choose whether to offer their customers the ability to authorize the
application of their trusted contact person information to all of the
customer's accounts. However, if a member firm chooses to do so, it
must offer customers the choice to assign trusted contact person(s) on
an account-by-account basis rather than to all accounts. This approach
seeks to provide additional flexibility for member firms and to
appropriately balance operational concerns with investor autonomy.\64\
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\64\ Although some customers may prefer to appoint a single
trusted contact person for all accounts, other customers may prefer
to appoint different trusted contact persons for different accounts
(e.g., a customer prefers one trusted contact person for their
personal account and a different trusted contact person for a joint
account).
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However, NASAA cautioned that while flexibility to seek a
customer's authorization to apply a trusted contact person to such
customer's existing and future accounts with the member may be
beneficial, members should not be permitted to obtain a single
authorization of a trusted contact person at the outset that would
apply broadly and indefinitely to all future accounts, without
periodically confirming that this remains the customer's intent. NASAA
suggested that FINRA consider requiring firms to request confirmation
or updates to trusted contact person information at least annually or,
at a minimum, FINRA should consider providing guidance to encourage
firms
[[Page 57416]]
to issue periodic reminders prompting customers to review and maintain
current trusted contact person information.
FINRA notes that Rule 4512 requires members to seek to update the
trusted contact information for those accounts subject to the
requirements in Exchange Act Rule 17a-3. Specifically, Supplementary
Material .06(c) to Rule 4512 provides that with respect to any account
subject to the requirements of Exchange Act Rule 17a-3(a)(17) to
periodically update customer records, a member is required to make
reasonable efforts to obtain or, if previously obtained, to update
where appropriate the name of and contact information for a trusted
contact person consistent with the requirements in Exchange Act Rule
17a-3(a)(17). Consistent with prior guidance, FINRA continues to
believe that, with regard to updating the contact information for other
accounts that are not subject to the requirements in Exchange Act Rule
17a-3, a member should consider asking the customer to review and
update the name of and contact information for a trusted contact on a
periodic basis or when there is a reason to believe that there has been
a change in the customer's situation.\65\
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\65\ See FINRA Seniors FAQs, supra note 7, at Q.4.4.
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CFP, FPA & NAPFA recommended that FINRA further amend Rule 4512 to
require firms to either have customers designate a trusted contact
person or have customers affirmatively opt out of the framework after
they have been informed of the benefits of listing a trusted contact
person. FINRA believes firms should retain flexibility in designing
their trusted contact program implementation rather than mandating a
specific opt-out mechanism. Providing firms with implementation
flexibility would allow them to innovate and develop effective
approaches tailored to their business models, customer bases, and
operational capabilities.\66\
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\66\ For example, FINRA has observed members promoting effective
ways of asking for trusted contact person information to increase
likelihood of a designation, such as requiring a ``yes'' or ``no''
response to the trusted contact person question in account opening
forms or asking, ``Who is your trusted contact?'' rather than,
``Would you like to name a trusted contact?'' See 2026 FINRA Annual
Regulatory Oversight Report, supra note 5, at 37-40.
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Rule 2165 Amendments
The proposed extension of the Rule 2165 maximum temporary hold
period from 55 to 145 business days generated strong support by many
commenters.\67\ For example, several commenters stated that these
amendments reflect the reality that fraud investigations frequently
take time and may involve coordination across institutions,
jurisdictions, and law enforcement or regulatory agencies.\68\
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\67\ CAI; Cardozo Law Clinic; CFP, FPA & NAPFA; Commonwealth;
Fidelity; FSI; Hicks & Loeffel; Long & Mierswa; LPL; SIFMA. Fidelity
and SIFMA requested 45-business-day intervals in lieu of 30-
business-day intervals.
\68\ Cardozo Law Clinic (citing research that APS investigation
times vary dramatically by state: while the national median stands
at 36 days, Kentucky averages 72 days, Vermont 81 days, New
Hampshire 90 days, and Washington 113 days); Fidelity; Long &
Mierswa; SIFMA.
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However, several commenters expressed opposition based on concerns
regarding risks to investors of prolonged asset freezes and investor
autonomy.\69\ For example, Pittsburgh Law Clinic stated that the
proposed maximum 145-business-day hold period would impose severe and
disproportionate financial hardship on elderly investors living on
fixed incomes. ASA stated that it did not believe the maximum 145-
business-day hold period was necessary in the vast majority of
situations and it would risk turning temporary holds into de facto
long-term freezes that could impose substantial costs and hardship on
seniors and other investors.
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\69\ ASA; PIABA; Pittsburgh Law Clinic.
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FINRA recognizes that many financial exploitation situations are
resolved within the existing time limits of Rule 2165, or within a
longer time period, when extended by a relevant authority.\70\ However,
in other situations, the proposed additional extensions would provide
relevant government authorities with more time, where necessary, to
assess referrals, determine whether to investigate, and evaluate
whether additional time will be needed to investigate or resolve the
matter. It would also provide additional time for a member to
communicate with these authorities regarding whether to terminate or
further extend the hold. Accordingly, FINRA continues to believe that a
maximum 145-business-day hold period is appropriate.
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\70\ FINRA notes that existing Rule 2165 permits holds beyond 55
business days at the relevant authority's request.
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FINRA notes that the proposed rule change would impose measured
conditions and other safeguards designed to ensure that the extension
framework is limited to appropriate circumstances, and does not result
in a default hold of 145 business days in all cases. Specifically, the
ability to extend for each 30-business-day period would be conditioned
on the member making reasonable follow-up efforts with the relevant
authority regarding the status of the reported matter, not having
received a response, and continuing to have a reasonable belief of
financial exploitation. The extension framework would also require
notification to relevant parties and documentation associated with such
extensions.
This balanced approach provides for longer holds in complex cases
that have been referred to government authorities while maintaining the
integrity of a ``temporary hold'' framework through a clearly defined
process.
All commenters addressing the proposal to add ``federal'' agencies
and authorities of competent jurisdiction supported the change, with
Hicks & Loeffel requesting guidance concerning relevant federal
entities.\71\ Several commenters supported the proposed expansion of
individuals authorized to place a hold,\72\ with CAI requesting further
broadening and NASAA urging caution. There was minimal feedback on
FINRA's proposed codification of existing FAQ guidance,\73\ and no
opposition.
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\71\ CAI; Fidelity; Hicks & Loeffel; NASAA; PIABA; SIFMA.
\72\ ASA; CAI; Fidelity; Long & Mierswa; SIFMA.
\73\ See supra Item II.A.1.III.D.
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Proposed New Rule 2166 ``Speed Bump''
The Notice Proposal would permit a member firm to place a temporary
delay of up to five business days on a transaction or disbursement in
the account of a customer if there is a reasonable belief of fraud
targeting the customer, with associated safeguards. There was broad
support for this proposed new rule; however, there were varying
perspectives on duration.\74\ Six commenters explicitly supported the
initially proposed five-business-day period as appropriate, with some
advocating for limited permitted extensions.\75\ However, multiple
commenters raised concerns that a five-business-day period would be
insufficient for investigation and customer outreach, and advocated for
a longer period, with specific suggestions ranging from seven to 20
business days.\76\
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\74\ ASA; Apex; CAI; Cambridge; Cardozo Law Clinic;
Commonwealth; Fidelity; FSI; Hicks & Loeffel; Long & Mierswa; LPL;
PIABA; Pittsburgh Law Clinic; SIFMA.
\75\ Apex; ASA; Cardozo Law Clinic; PIABA; Pittsburgh Law
Clinic; St. John's.
\76\ CAI; CFP, FPA & NAPFA; Fidelity; FSI; Long & Mierswa; LPL;
Mustico; SIFMA.
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For example, CFP, FPA & NAPFA stated that a longer ``speed bump''
would allow firms to better evaluate the situation and align with law
enforcement and may also help customers recognize what may actually be
a high-pressure scam, which could cloud a victim's judgment, especially
[[Page 57417]]
``in the moment.'' \77\ Fidelity suggested that a short timeframe could
expose clients to greater risk by unnecessarily expediting
investigations and removing transaction holds. Fidelity opined that
increasing the holding period of the ``speed bump'' would better
reflect the operational realities of fraud protection. Commonwealth
disagreed with the five-business-day period, noting the ``stark''
difference in length between the Rule 2165 and Rule 2166 holds.\78\
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\77\ CFP, FPA & NAPFA.
\78\ Commonwealth.
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Based on feedback that the initially proposed five-business-day
temporary delay period is inadequate, FINRA is proposing a temporary
delay of 10 business days. FINRA believes 10 business days would
provide members more time to facilitate outreach to the customer (away
from perpetrator influence), and, if the firm chooses, authorized
parties or trusted contact persons, in order to persuade the customer
to recognize the attempted fraud and not to proceed with the
transaction or disbursement, thereby preventing customer losses. The
additional time would also provide member firms flexibility to engage
in the types of fraud prevention activities that commenters described,
such as coordination across firm departments, account review and
verification processes, trusted contact person engagement and
consultation with regulatory agencies or law enforcement.
FINRA does not believe permitting a delay of longer than 10
business days under new Rule 2166 would be appropriate at this time, as
it would risk turning what is intended to function as a temporary
``speed bump'' that helps firms disrupt fraud before disbursements or
transactions occur into a longer hold process. A substantially longer
delay for all adult customers could increase the risk of interfering
with customer autonomy. FINRA believes a 10-business-day temporary
delay approach balances investor protection with respect for customer
autonomy.
Apex sought confirmation that firms would have flexibility to
release a Rule 2166 hold early if the fraud concern is cleared before
the hold period expires. FINRA confirms that early termination of a
hold is permitted and notes that the safe harbor protection of proposed
Rule 2166 is conditioned on the member having a reasonable belief that
fraud has occurred, is occurring, has been attempted, or will be
attempted. Accordingly, FINRA would expect a member to lift a temporary
delay when it no longer has a reasonable belief of fraud.\79\
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\79\ This is consistent with the approach in Rule 2165. See
Securities Exchange Act Release No. 79964 (February 3, 2017), 82 FR
10059, 10067 (February 9, 2017) (Order Granting Accelerated Approval
of File No. SR-FINRA-2016-039).
---------------------------------------------------------------------------
The Notice Proposal would require the member firm to provide
notification to authorized parties on the account and a trusted contact
person of the temporary delay, the reason for the delay, and how the
member can be contacted for questions or concerns. Several commenters
raised concerns that this mandatory notification to parties other than
the customer may be unnecessary to address suspected fraud, could be
viewed as overreaching by customers, could create confusion and
unnecessary customer friction (especially in the absence of customer
vulnerability), and could discourage trusted contact adoption or even
chill member firms' willingness to rely on the safe harbor.\80\ These
commenters advocated for making notification to trusted contact persons
and other authorized parties discretionary rather than mandatory under
Rule 2166 (unlike Rule 2165, which applies to vulnerable adults and
seniors).
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\80\ ASA; Fidelity; LPL; SIFMA.
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Based on these comments, FINRA is proposing to require notification
only to the customer, as discussed above. FINRA believes it is
appropriate and consistent with the purposes of proposed Rule 2166 to
provide member firms flexibility in this regard to address suspected
fraud on a case-by-case basis. Notification to authorized parties and
trusted contact persons would be permitted at the member's discretion.
Permissive vs. Mandatory Hold Under Rule 2165 and Proposed New Rule
2166
Current Rule 2165 and proposed Rule 2166 are structured as safe
harbors, permitting members to place a temporary hold on a transaction
or disbursement in a customer's account if there is a reasonable belief
of financial exploitation/fraud targeting the customer, with associated
safeguards. Two commenters objected to the permissive nature of these
rules, instead advocating for a mandatory hold if a member firm
observes red flags of exploitation or fraud.\81\
---------------------------------------------------------------------------
\81\ Fitapelli; PIABA.
---------------------------------------------------------------------------
For example, Fitapelli stated that, ``By allowing firms to decline
intervention even when credible red flags of exploitation are present,
the rule shields members from liability while leaving elderly customers
exposed. The permissive nature of the rule undermines its stated
purpose of protecting senior investors.'' \82\ Fitapelli urged FINRA to
amend Rule 2165 to ``require mandatory transaction holds and reporting
when objective indicators of elder financial exploitation are present,
supported by clear standards and regulatory oversight.'' \83\ PIABA
echoed similar sentiments, stating that a firm's affirmative duty to
delay a disbursement or take other protective actions for its customers
when it suspects fraud or abuse must be more explicit. PIABA pointed to
the ``growing body of state law that already imposes mandatory
reporting obligations on broker-dealers and investment advisers.'' \84\
---------------------------------------------------------------------------
\82\ Fitapelli.
\83\ See supra note 82.
\84\ PIABA, at 3.
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Tobin recommended FINRA adopt a mandatory escalation framework
``when a licensed industry professional raises a senior-exploitation
concern.'' \85\ Tobin also recommended FINRA require ``documentation
when a broker declines to act under Rule 2165.'' \86\
---------------------------------------------------------------------------
\85\ Tobin, at 2.
\86\ See supra note 85.
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FINRA continues to believe that a permissive hold framework would
better serve both investor protection and operational realities than a
mandatory hold framework. The existence of trusted contact persons,
internal escalation procedures, and other protective measures
(including, as applicable, relevant state laws) under the current
framework provides multiple pathways for intervention without requiring
holds in every case. Members may determine that customer education,
trusted contact person notification, or enhanced monitoring represents
a more appropriate response than temporary holds in some instances, and
mandatory holds would eliminate this graduated approach.
``Reasonable Belief'' Standard
To rely on Rule 2165 or proposed Rule 2166, a member must have a
reasonable belief of financial exploitation targeting the customer
under Rule 2165 or a reasonable belief of fraud targeting the customer
under proposed Rule 2166.\87\ Several
[[Page 57418]]
commenters requested guidance on the ``reasonable belief''
standard.\88\ The ``reasonable belief'' standard is intentionally
designed to accommodate a wide variety of facts and circumstances to
which these rules apply.\89\ FINRA also notes that members have
experience with applying this standard under Rule 2165. However, FINRA
remains committed to assisting member firms in protecting investors,
and will consider providing additional interpretive guidance if
implementation experience reveals areas where members would benefit
from further clarification.
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\87\ Separately, under Rule 2165, the definition of Specified
Adult incorporates a ``reasonable belief standard'' with respect to
impairments (``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''). FINRA
notes that a customer's suspected diminished capacity alone is not
sufficient to place a temporary hold or delay under Rules 2165 or
proposed Rule 2166, but rather the member firm must have a
``reasonable belief'' of fraud or financial exploitation. See also
supra note 34.
\88\ Cardozo Law Clinic; Mustico; NASAA; Sigma/Parkland; Singer.
\89\ FINRA has developed several programs to provide member
firms with intelligence, resources and practical guidance that are
useful in identifying red flags of fraud and protecting customers
from increasingly sophisticated fraud schemes. For example, FINRA
launched its Financial Intelligence Fusion Center (``FIFC'') in 2026
to collect, analyze, and disseminate cyber and fraud threat
intelligence to member firms in real time through a secure portal.
Moreover, FINRA provides member education in various forms including
conferences, workshops, the FINRA Annual Regulatory Oversight
Report, and continuing education courses. As discussed above, FINRA
also publishes investor education materials that member firms can
share with customers.
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ACATS-Related Fraud
Apex focused on the interaction between proposed Rule 2166, FINRA
Rule 11870 (Customer Account Transfer Contracts), and National
Securities Clearing Corporation (``NSCC'') Rule 50 (Automated Customer
Account Transfer Service) in the ACATS context. Apex supported proposed
Rule 2166 but raised concerns that its effectiveness would be
constrained unless the account transfer framework and indemnification
rules are modernized. Apex recommended that FINRA amend Rule 11870 to
add suspected fraud as a permissible basis to take exception to a
transfer instruction and coordinate with NSCC/DTCC and the Commission
regarding indemnification reform.
FINRA appreciates Apex's concerns regarding ACATS-related fraud and
the interaction between proposed Rule 2166 and existing account
transfer processes. Proposed Rule 2166 would provide member firms with
a safe harbor from Rule 11870 when a firm acts in accordance with the
requirements of the proposed rule.
Amendments to Rule 11870 are outside the scope of this proposal,
but FINRA is separately considering whether additional steps may be
appropriate to deter fraud in the new account opening and account
transfer processes.\90\
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\90\ See, e.g., FINRA Quarterly Regulatory Policy Agenda (June
2026), <a href="https://www.finra.org/rules-guidance/rulemaking-process/regulatory-policy-agenda">https://www.finra.org/rules-guidance/rulemaking-process/regulatory-policy-agenda</a>.
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Litigation/Complaint Risk
Several commenters raised concerns that expanded authority to place
temporary holds or delays could increase litigation risk, customer
complaints or adverse consequences for associated persons.\91\
---------------------------------------------------------------------------
\91\ See ASA; Cambridge; Sigma/Parkland.
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FINRA recognizes that firms may face competing risks when they act
to protect customers from suspected fraud or financial exploitation and
when they decline to do so. FINRA emphasizes that Rule 2165 and
proposed new Rule 2166 are permissive safe harbors that do not require
member firms to place temporary holds or delays, nor do they create
private rights of action. Whether a customer complaint is reportable
depends on the applicable reporting requirements and the facts and
circumstances of the complaint.\92\
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\92\ FINRA has indicated that it will consider issuing guidance
regarding aspects of customer complaint reporting under FINRA Rule
4530 (Reporting Requirements). See Rule 4530; FINRA Quarterly
Regulatory Policy Agenda, supra note 90; see also Form U4 (Uniform
Application for Securities Industry Registration or Transfer) at
Item 14I(3)(b) and Form U5 (Uniform Termination Notice for
Securities Industry Registration) (which, in general, require
disclosure if an individual is the subject of a written customer
complaint that alleges that a registered or formerly registered
individual was involved in forgery, theft, misappropriation or
conversion of funds or securities).
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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
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#b0c2c5dcd59dd3dfddddd5dec4c3f0c3d5d39ed7dfc6"><span class="__cf_email__" data-cfemail="6e1c1b020b430d0103030b001a1d2e1d0b0d40090118">[email protected]</span></a>. Please include
file number SR-FINRA-2026-018 on the subject line.
Paper Comments
<bullet> 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-2026-018. 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 (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). Copies of the filing will be available for inspection and
copying at the principal office of FINRA. Do not include personal
identifiable information in submissions; you should submit only
information that you wish to make available publicly. We may redact in
part or withhold entirely from publication submitted material that is
obscene or subject to copyright protection. All submissions should
refer to file number SR-FINRA-2026-018 and should be submitted on or
before September 30, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\93\
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\93\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-18293 Filed 9-8-26; 8:45 am]
BILLING CODE 8011-01-P
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