Regulators Want Investors to Give Advisors a ‘Trusted Contact’
By Cheryl Winokur Munk
Sept. 30, 2021 9:54 am ET: State and federal securities regulators have launched a new campaign to encourage investors to provide their financial firms with a trusted contact. This is someone who firms are authorized by a client to reach out to in certain circumstances, such as when financial abuse is suspected or when the investor can’t be located after several attempts.
Finra, the North American Securities Administrators Association (Nasaa), and the SEC’s Office of Investor Education and Advocacy, are urging financial firms to share the resources they created with their clients. These materials, which seek to answer frequently asked questions investors may have about trusted contacts and the roles they can and cannot play, can be found on Finra’s website
The initiative comes after state regulators found that nearly 59% of state-regulated advisors didn’t have “policies or procedures in place for addressing the financial exploitation of seniors or vulnerable persons.” This shortcoming was discovered as part of a broader review of practices of more than 1,200 advisors with $100 million or less of assets undermanagement.
Regulators and compliance professionals told Barron’s Advisor that firms need to ensure they have the proper mechanisms to allow them to protect elderly or vulnerable clients from financial abuse, which can include being bullied or manipulated out of savings, Internet scams, and identity theft. This includes the ability to contact a trusted individual. Firms also need to have robust training programs to teach advisors how to identify and respond to red flags, regulators and compliance professionals say.
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