Senior Investor Protection: Temporary Holds on Disbursements (FINRA Rule 2165)
An 81-year-old client with early signs of cognitive decline arrives at a broker-dealer branch accompanied by an unknown individual introduced as a 'caretaker.' The client requests an immediate wire transfer of $150,000 (representing 75% of their total life savings) to an offshore bank account for an 'urgent overseas investment opportunity.' Under FINRA Rule 2165, what protective action is the firm permitted to take?
FINRA Rule 2165 allows a firm to place a temporary hold of up to 15 business days on suspicious disbursements for clients aged 65+ and notify their Trusted Contact Person.
Complete Analysis & Legal Rationale
Under FINRA Rule 2165 (Financial Exploitation of Specified Adults), if a firm reasonably believes that financial exploitation of a specified adult (individuals aged 65 and older, or adults with mental/physical impairments) has occurred or is being attempted, the member firm may place a temporary hold on the disbursement of funds or securities for up to 15 business days (which can be extended by an additional 10 business days if internal review supports exploitation). The firm must promptly notify the account owner and the designated Trusted Contact Person.
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:
Executing the wire without investigation enables elder financial abuse, defeating the purpose of Rule 2165.
Rule 2165 authorizes a temporary hold up to 15 business days and outreach to the trusted contact.
Broker-dealers cannot confiscate private customer assets; they place temporary administrative holds.
Rule 2165 specifically applies to disbursements of funds (cash wires) and securities transfers.
Official Standard: Authorizes temporary holds on suspicious fund disbursements and securities transactions for adults 65+.