Senior Exploitation and Diminished Capacity Regulatory Procedures
An 82-year-old long-time client calls his registered representative and erratically requests the immediate liquidation of his entire $600,000 blue-chip equity portfolio to wire funds to an unfamiliar offshore entity. The client appears confused. Under FINRA Rule 2165, what action is the representative PERMITTED to take?
FINRA Rule 2165 permits member firms to place a temporary hold of up to 15 business days on disbursements from accounts of specified adults (age 65+) when financial exploitation is suspected, and contact the Trusted Contact Person.
Complete Analysis & Legal Rationale
Broker-dealers have protective authority under Rule 2165 and Rule 4512 to safeguard vulnerable seniors. The firm may place a 15-business-day hold on the disbursement (not trades), initiate an internal review, and communicate with the customer's trusted contact.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Accurately applies FINRA Rule 2165 15-business-day hold on disbursements and trusted contact notification.
Failing to act on red flags of elder exploitation violates FINRA supervisory duties.
The firm cannot freeze accounts permanently without a court order.
Firm error accounts are only for trade correction, never customer fund holding.
Official Standard: Authorizes temporary disbursement holds and trusted contact notifications.