FINRA Rule 2165: Protecting Seniors by Freezing Assets

by Admin Istrator | April 21, 2022 3:24 pm


In 2018, FINRA adopted FINRA Rule 2165 to combat extremely high incidences of elder financial abuse[1]. In 2020, Elder Fraud claimed over 100,000 victims, summing up to losses of nearly $1 billion. According to a report by the Internet Crime Complaint Center (IC3), the 60+ demographic was hit the hardest, both in the number of complaints as well as by total loss. The second-hardest-hit consort was the age group 50 – 59, followed by 40 – 49.

The year 2020 saw an enormous spike in elder financial abuse. Unfortunately, the trend only seems to have continued in 2021. Although the number of reported incidents in 2021 for the 60+ demographic was lower at 92,371, total losses came in at a whopping $1.68 billion for that demographic alone.

2018: FINRA Adopts Rule 2165

It is for this reason that the SEC approved FINRA Rule 2165 in 2018, and an amendment to rule 4512. These two rules specifically protect natural persons over 65 years, or adults over 18 years who have a mental or physical impairment that prevents them from being able to fully protect their interests.

Rule 2165 confers certain rights on FINRA members to temporarily block transactions or disbursements that the member believes are fraudulent, or that might lead to fraud in the future.

Let’s take a detailed look at FINRA Rule 2165 and how it is designed to protect seniors and their funds.

FINRA Rule 2165 in plain English:

Under FINRA rule 2165, the “Specified Adult” is either a natural person of over 65 years or an adult of over 18 years who has a physical or mental impairment that prevents them from being able to protect their own interests. 

A “member” is a registered member of FINRA[2], such as a financial advisor or a firm, or any other professional who is registered with FINRA. (Investors should always deal only with FINRA-registered advisors.)

Through the rule, a member has the right to place a hold on a transaction or disbursement if he or she believes that financial exploitation is, or might soon be, at play. The rule specifically defines financial exploitation as:

Freezing Assets Under FINRA Rule 2165

When a member suspects that financial exploitation is at play, they have the full right to place a temporary hold on the disbursement of funds, or the transaction.

When doing so, the member must maintain full documentation which specifies:

How Long is the Hold Time Under FINRA Rule 2165?

The initial hold will expire 15 business days after being initiated unless it is either canceled or extended by:

Can the Initial Hold Period be Extended?

The member can extend the hold under the following circumstances:

Supervisory Procedures Under FINRA Rule 2165

Rule 2165 requires that there be proper supervisory procedures in place to ensure compliance with this rule.  The supervisory procedures must include the name and title of all persons authorized who can place such restrictions on an account. These persons must be associated persons of the member (such as employees) and serve in a compliance, supervisory, or legal capacity in the firm.

Other Important Points to Remember About FINRA Rule 2165

Getting Help if You were a Victim

If you feel that you or someone you know has been a victim of elder fraud, it is advisable to seek legal advice immediately.

  1. elder financial abuse:
  2. FINRA:

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