Voglio sapere a riguardo di…

34090

Federal Register / Vol. 86, No. 121 / Monday, June 28, 2021 / Notices
transactions.47 The proposed amendments would also impact the customers of those firms. In instances when a firms hold on a transaction prevented financial exploitation, the customer whose transaction was held would benefit from not incurring the negative financial consequences of the transaction. In instances when a transaction hold was executed and no financial exploitation was found, the economic impact of the hold stems primarily from the magnitude of the securitys price movement positive or negative between the time the hold was placed and the time it was lifted.
Alternatives Considered
khammond on DSKJM1Z7X2PROD with NOTICES

FINRA considered various alternatives to the proposed rule amendments. First, FINRA considered different possible extensions of the temporary hold period, ranging from no extension to an extension of up to 75business days. On the one hand, a longer temporary hold period would allow member firms more time to investigate and contact the relevant parties, as well as obtain input from a state regulator, agency, or court if needed. Alternatively, an extended temporary hold period could result in increased costs to both investors and firms.48 These include increased costs to investors from lost investment opportunities or liquidity problems and increased costs to firms from legal challenges to investigations, all of which are anticipated to be related to the length of the hold on disbursements.
Considering these factors, as well as information from the various outreach efforts and stakeholder engagements, FINRA believes that the proposal strikes a balance across the spectrum of possible options.
Second, FINRA considered not extending Rule 2165 to transactions, but rather keeping the temporary hold option only for disbursements. FINRA
weighed the costs and benefits of doing so, as discussed above, also considering that some states already permit such a hold on transactions. Ultimately, FINRA
has found the proposed amendment to expand Rule 2165 to transactions to strike an appropriate balance between regulatory burden, investor protection and investor choice.
47 When asked in the survey about FINRA
extending Rule 2165 to transactions, respondents were evenly split with 50% anticipating that the member firm would place holds on transactions pursuant to amended Rule 2165 and 50%
anticipating that the firm would not place holds.
48 See discussion in Economic Impacts section above in section B, Hold Period section below in section C, and Regulatory Notice 2034.

VerDate Sep<11>2014

17:39 Jun 25, 2021

Jkt 253001

Third, FINRA considered requiring firms to place temporary holds, for either disbursements or transactions, rather than permitting it. FINRA
believes that providing firms with the discretion of placing a hold, versus a requirement, results in incentives to use the hold option in a way that ultimately benefits both the firm and its customers.49
Finally, FINRA considered extending Rule 2165 to situations where a firm has a reasonable belief that one of its customers is exhibiting signs of diminished capacity or cognitive decline, affecting the customers ability to protect their own financial interests, without any evidence of financial exploitation. FINRA believes that the associated costs with establishing such a standard outweigh the potential benefits. Such an extension would give discretion to member firms that could directly or indirectly impede informed investor choice, with potential costs that might exceed the potential benefits from investor protection.
C. Self-Regulatory Organizations Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The proposed rule change was published for comment in Regulatory Notice 2034. FINRA received 19
comment letters in response to the Notice 2034 Proposal. A copy of the Notice 2034 Proposal is attached sic as Exhibit 2a. Copies of the comment letters received in response to the Notice 2034 Proposal are attached sic as Exhibit 2c.50
The comments and FINRAs responses are set forth in detail below.
Support for the Notice 2034 Proposal Fourteen commenters expressed support for the Notice 2034 Proposal.51
Several commenters stated that the proposed amendments will better protect vulnerable investors from financial exploitation. For example, Miami Investor Rights Clinic stated that it fully supports the proposed amendments as they will provide greater protection to seniors and vulnerable adults that may be victims of 49 See Bruce I. Carlin, Tarik Umar, and Hanyi Yi, Deputization, National Bureau of Economic Research Working Paper No. 27225 May 2020
discussing the benefits of providing financial institutions tools to address suspected financial exploitation versus requiring specific actions.
50 See Exhibit 2b for a list of abbreviations assigned to commenters.
51 See CAI, Cambridge, Commonwealth, Edward Jones, Fidelity, FSI, IRI, Miami Investor Rights Clinic, MMLIS, NAPSA, Norcross, Philadelphia Financial Exploitation Task Force, SIFMA and Wells Fargo.

PO 00000

Frm 00124

Fmt 4703

Sfmt 4703

financial exploitation. IRI also stated that the proposed amendments will better enable firms to prevent the financial exploitation of vulnerable Americans.
LPL supported the proposed amendments but requested that the hold period be further extended to allow for holds of up to 100-business days.
Regarding the hold period in Rule 2165, FINRA has tried to strike a reasonable balance in giving member firms adequate time to investigate and contact the relevant parties, as well as seek input from a state regulator or agency or a court if needed, but also not permitting an open-ended hold period in recognition of the seriousness of placing a temporary hold. Rule 2165
would continue to permit the temporary hold to be terminated or extended by a state regulator, state agency or court of competent jurisdiction. In addition, if the proposed hold period does not provide member firms adequate time to investigate and contact the relevant parties, as well as seek input from a state regulator or agency or a court if needed, FINRA may consider extending the temporary hold period in future rulemaking.
Opposition to or Concerns With the Notice 2034 Proposal PIABA supports enhanced protections for investors but expressed concern that member firms could misuse the proposed amendments. PIABA
recommended that FINRA require in Rule 2165 that the member firm: 1
Update its written supervisory manuals to include training and review transactions suspected of elder abuse;
2 include in its retained records documentation of the firms reasonable efforts to quickly investigate the matter;
and 3 file a report with the appropriate APS agency and state regulator as soon as reasonably practical but no later than seven business days from the initial hold period.
Regarding PIABAs suggested requirements, Rule 2165 currently includes several safeguards designed to prevent misapplication of the rule, including requiring that member firms that intend to place a hold pursuant to Rule 2165 must: 1 Retain records related to the firms internal investigation; 52 and 2 develop and document training policies or programs reasonably designed to ensure that associated persons comply with the requirements of the rule.53 FINRA also expects member firms to comply with 52 See 53 See
E:FRFM28JNN1.SGM

Rule 2165d.
Supplementary Material .02 to Rule 2165.

28JNN1