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Federal Register / Vol. 86, No. 121 / Monday, June 28, 2021 / Notices all applicable state requirements, including reporting requirements.
NASAAs letter acknowledges that neither FINRA nor the states have brought disciplinary action due to misuse of Rule 2165 or any state temporary hold laws by a member firm.
However, as discussed in greater detail below, NASAA does not support extending the temporary hold period and expressed concern about the potential impact of a longer hold period on customers. FINRAs responses to NASAAs detailed concerns are included below in section C under Hold Period and Transactions in Securities.
Pittsburgh Clinic does not support current Rule 2165 or the proposed amendments because it believes that member firms could misuse temporary holds for their financial benefit. FINRA
has extensively addressed the concerns of potential misuse above in section A
under the Need for the Proposed Amendments.
Pittsburgh Clinic also said that the survey of member firms should not be relied on to assess Rule 2165 or the proposed amendments because: 1 The survey respondents are member firms that stand to benefit from an increase to the extension of the hold period, as well as the rules safe harbor provisions; 2
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required to provide any information to support their claims; and 3 the survey respondents represent an inadequate and unrepresentative sample size the survey was provided to 3,516 member firms, of which only 238 member firms responded.
FINRA engaged in extensive internal and external stakeholder outreach during the assessment phase of the retrospective review to assess the effectiveness and efficiency of FINRAs rules and administrative processes that help protect senior investors from financial exploitation. This outreach included: 1 Seeking comment in Regulatory Notice 1927 on several questions with respect to addressing financial exploitation and other circumstances of financial vulnerability for senior investors; 2 obtaining input from several advisory committees comprising member firms of different sizes and business models, investor protection advocates, member firms, and trade associations; 3 obtaining the perspective of FINRAs operating departments that administer the rules and their administration; 4 considering FINRA examination observations and findings involving senior issues; and 5
developing an anonymous survey that was distributed to all member firms in the first quarter of 2020. In addition, as part of the action phase of the
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54 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.

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person or using other tools, but the firm has experienced situations where the current 25-day period provided under Rule 2165 is insufficient. Edward Jones notes having experienced this situation when working with state agencies, such as APS, to investigate a case of suspected financial exploitation.
Edward Jones stated that some APS
agencies are not adequately resourced to quickly review these matters and yet are hesitant to request an extension of a hold until they determine whether exploitation exists.
While NAPSA and Philadelphia Financial Exploitation Task Force previously supported a 60-business day extension in their comments to Regulatory Notice 1927, they
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supported the proposed extension of the temporary hold period in the Notice 20
34 Proposal. NAPSA and Philadelphia Financial Exploitation Task Force noted that the latest data submitted to the NAMRS indicates that the average investigation duration of all reported cases is 52.6 days. Recognizing that financial exploitation investigations are often more complicated and time consuming, NAPSA and Philadelphia Financial Exploitation Task Force expressed appreciation for the additional days as a starting point, with the ability to revisit as more data becomes available.
While acknowledging that an adequate period for review of the facts and circumstances must be allowed,
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The majority of commenters supported the proposed amendment to extend a temporary hold for an additional 30 business days if the member firm has reported the matter to a state regulator or agency or a court of competent jurisdiction.54 For example, Edward Jones stated that the firm is often able to quickly resolve matters where it suspects financial exploitation of a senior or vulnerable investor by engaging the customers trusted contact
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retrospective review, FINRA sought comment on the proposed amendments to Rule 2165 in Regulatory Notice 20
34. FINRA considered the collective feedback from the Retrospective Review Stakeholders and comments to the Notice 2034 Proposal in assessing Rule 2165 and the proposed amendments.
The purpose of the survey distributed to all member firms was to collect information in order to validate the feedback received and to provide an additional opportunity for all member firms to provide their views. There were 238 firms that responded to the survey, and the breakdown of these firm survey respondents according to firm size, as measured by the number of registered representatives, and the comparison to the general population of member firms, is provided in Table 1 below. With respect to the Pittsburgh Clinic comment letter, FINRA notes that: 1
The membership survey is one tool frequently used by FINRA in its outreach efforts to solicit information from its members; 2 the response rate mentioned is a lower bound when considering relevant member firms; and 3 the breakdown of survey respondents by firm size is mostly representative with respect to the full member firm population, as summarized in Table 1.