Financial Exploitation of Vulnerable Adults: New Tools for Firms, Courtesy of FINRA

On February 5th, FINRA officially adopted a pair of new provisions designed to empower firms to identify and assist elderly and disabled customers who may be victims of financial exploitation. Continue reading

On February 5th, FINRA officially adopted a pair of new provisions designed to empower firms to identify and assist elderly and disabled customers who may be victims of financial exploitation. One amends the rules around collecting customer information, and the other lets a firm take action in response to unusual account activity.

These changes could soon show up on multiple exams, including the Series 6, 7, 24, 26, 27, 28, 65, 66, and of course the upcoming SIE exam.

The “Trusted Contact Person”

In your future career in securities, you may have an elderly or disabled customer who begins making decisions that don’t appear to be in his best interest. Maybe you can’t get ahold of him to ask about unusual transactions on his account. But if the transactions appear to be legally authorized by the customer, is there anything you can do about your suspicions?

Yes. These new rule changes help you help this customer in two ways. First, you’re more likely to have someone close to the customer who you can reach out to. From now on, when a firm collects or updates a customer’s personal information it must try to get the name and contact information of a trusted contact person. The firm has a limited ability to share information with the trusted contact person to address certain situations that may indicate that the customer is vulnerable.

For example, if the firm can’t contact the customer, it could ask the trusted contact person about her whereabouts. Depending on the situation, this could be as simple as confirming that the contact information you have for the customer is still accurate. If the firm reasonably suspects a more serious problem, it can also ask questions to help determine whether poor health may be interfering with the customer’s ability to protect her own interests. In this type of situation, the firm can also ask for information about any legal guardian or power of attorney the customer might have.

Temporary Protective Holds

The other new provision lets a member firm put a temporary hold on an account if there is a reasonable belief that an elderly or disabled customer is being exploited. This type of hold can be placed if the following conditions are met:

  • One of the individuals authorized to transact business on the account is:
    • At least 65 years of age
    • At least 18 years of age and has a mental or physical condition that keeps him from protecting his own interests
  • The member firm has a reasonable belief that the customer may be the victim of financial exploitation.
  • If the reasonable belief only applies to certain transactions (as opposed to all activity on the account), only those transactions should be blocked. Other account activity should continue to be allowed.

The member firm does not need definite knowledge of a specific, diagnosed disability, or any other kind of detailed medical information about the customer. The condition doesn’t even have to be permanent. A customer temporarily hospitalized for surgery could fit the definition, as long as there is reason to believe this is keeping her from being able to protect her own interests.

Financial exploitation is defined broadly for these purposes. Such exploitation can consist of “taking, withholding, appropriation, or use” of assets in the customer’s account, whether cash or securities. The reasonable belief can be in regard to past, present, or future exploitation. It can involve unusual actions that the customer supposedly took, or it can involve actions taken by someone else “through the use of a power of attorney, guardianship, or any other authority.” It can involve suspicion of intimidation, trickery, a combination of the two, or any other form of “undue influence” over the vulnerable person.

Required Follow-Up

When this kind of temporary hold is placed on an account, the firm must follow up in several ways. The firm has two business days to notify all parties authorized to transact business on the affected account, as well as the customer’s trusted contact person. If the firm has a reasonable belief that an individual is involved in the exploitation, that individual is excluded from the notification requirement, even if it is the trusted contact person. The notification must disclose the temporary hold and the reason for it.

Another way that the firm must follow up is with an internal review of what the reasonable belief of exploitation was based on. This review must be opened as soon as the hold is placed. It is important that the review be completed promptly, because it may affect the length of the hold.

Initially, the temporary hold may be placed for up to 15 business days. The firm is allowed to grant an extension of up to 10 more business days, but only if the internal review is completed and finds that the belief was in fact reasonable. (On the other hand, if the internal review finds that the belief was not reasonable, the hold would likely be ended immediately.)

The member firm can extend the hold further if a court or state agency (such as Adult Protective Services) orders or requests it. A request from a state agency need not be formal. It could be as simple as the agency asking for an extended hold to give them more time to investigate. Such a request should be carefully documented so that the firm can show that the extension is allowed.

Each member firm must have written procedures specifying who within the firm is authorized to place, remove, or extend this kind of hold. Only an associated person whose job function is supervisory, legal, or compliance-related can be authorized to place this kind of hold. All records related to such a hold must be retained for the default period of six years.

Continue to rely on Solomon Exam Prep for up-to-date information of interest to takers of the Series 6, 7, 24, 26, 27, 28, 65, 66, SIE, and other securities exams.

 

It’s Settled: SEC Shortens Regular-Way to T+2

If you’ve ever traded securities or studied for a securities licensing exam, then you’ve probably come across T+3. No, it’s not an herbal supplement or an embarrassing medical procedure. Continue reading

If you’ve ever traded securities or studied for a securities licensing exam, then you’ve probably come across T+3. No, it’s not an herbal supplement or an embarrassing medical procedure. T+3 refers to the regular-way settlement period for most securities transactions. This means that securities must be paid for and delivered by three business days from the trade date. T+3 also means you don’t become the owner of record of a security until three business days after you purchase it.

Well, add T+3 to the list of things that have gone out of style. Effective May 30, 2017, the SEC will shorten the regular-way settlement period to two business days. And so will begin the age of T+2, which is intended to “increase efficiency and reduce risk for market participants,” according to SEC Acting Chairman Michael Pinowar.

This shorter settlement period for the trading of secondary market securities has been discussed by the SEC for years. The change is expected to lower margin requirements for clearing agency members, reduce liquidity stress when markets are volatile, and harmonize settlement with European markets, which moved to T+2 in 2014.

This settlement period will not apply to every securities transaction, though. T+2, like T+3 before it, will apply to:

  • Stocks
  • Bonds
  • Municipal securities
  • Exchange-traded funds
  • Mutual funds traded through a brokerage firm
  • Unit investment trusts
  • Limited partnerships that trade on an exchange

The securities industry moves fast. Don’t get left behind! Visit www.solomonexamprep.com or call us at 503-601-0212 for more information about the latest securities exam preparation and education.

Solomon has helped thousands pass their Series 6, Series 7, Series 24, Series 26, Series 27, Series 28, Series 50, Series 51, Series 52, Series 53, Series 62, Series 63, Series 65, Series 66, Series 79, Series 82, and Series 99.

Announcing the Release of the Solomon Exam Prep Android Mobile App!

With the release of the Solomon Exam Prep app, you have full mobile access to your Solomon study materials with the click of a button. Continue reading

Do you need to take a securities licensing exam?

Do you wish you had more time to study?

With the release of the Solomon Exam Prep Android app, you have full mobile access to your Solomon study materials at the click of a button.

  • Easier and quicker—Just click the Solomon Exam Prep icon on your phone to be taken directly to your account.
  • Access all your materials—The app provides full site functionality and access to your study guide, exam simulator, audiobook, and video lecture.
  • No typing on tiny keyboards—Don’t worry about typing in a web address! Our app will take you right where you need to be.

Move into the future of mobile securities exam prep with the Solomon Exam Prep app!

To download the app, please visit: goo.gl/IkNceh

Solomon Exam Prep has helped thousands of financial professionals pass their FINRA, NASAA, and MSRB licensing exams, including the Series 6, Series 7, Series 24, Series 26, Series 27, Series 28, Series 50, Series 51, Series 52, Series 53, Series 62, Series 63, Series 65, Series 66, Series 79, Series 82, and the Series 99.

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Series 27 & Series 28 Exam Study Guides—Now Available!

Solomon Exam Prep is pleased to announce the publication of our Exam Study Guides for the Series 27 Financial and Operations Principal Qualification Examination and Series 28 Introducing Broker-Dealer Financial and Operations Principal Qualification Examination. Continue reading

Solomon Exam Prep is pleased to announce the publication of our Exam Study Guides for the FINRA Series 27 Financial and Operations Principal Qualification Examination and FINRA Series 28 Introducing Broker-Dealer Financial and Operations Principal Qualification Examination. An Online Exam Simulator for both exams has been available for the past year, but we are excited to expand our product offerings to better assist our customers in passing these exams.

Both Exam Study Guides are available as a hard copy book and can be purchased on the Solomon Exam Prep website. An online, digital version of these Study Guides will be available in the coming weeks.

Solomon Exam Prep Exam guides focus on the most important aspects of the exam and are peppered with frequent examples, exercises and practice questions. These succinct Exam Study Guides will get you on track to passing your exam in no time.

These new guides are additionally offered as part of our Essentials Study Package and included with our Online Exam Simulator—at a discounted price. Used successfully by thousands, this powerful combination gives you what you need to learn and retain the material by testing yourself as you go.


Series 27 Study Guide

Do Regulation T, rehypothecation and FOCUS reports give you a headache? Do you need to take the FINRA Series 27 exam? If you can answer yes to both questions, then let Solomon Exam Prep help relieve your anxiety. The Solomon Exam Prep Guide to the Series 27 FINRA Financial and Operations Principal Qualification Examination offers an efficient and comprehensive overview of what you need to know to pass the Series 27 exam.

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Series 28 Study Guide

Do PAB Accounts, margin requirements and FOCUS reports give you a headache? Do you need to take the FINRA Series 28 exam? If you can answer yes to both questions, then let Solomon Exam Prep help relieve your anxiety. The Solomon Exam Prep Guide to the Series 28 FINRA Introducing Broker-Dealer Financial and Operations Principal Qualification Examination offers an efficient and comprehensive overview of what you need to know to pass the Series 28 exam.

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Exam Alert: FINRA Revises Public, Non-public Arbitrator Standards

Effective June 26, 2015, FINRA will alter its rules regarding who will be consider a public or non-public arbitrator. The change will make it so that any arbitrator who has worked in the financial industry for any period of time will be considered a non-public arbitrator. Also, arbitrators who represent investors or the financial industry as a significant part of their business will be considered non-public arbitrators, but may become public arbitrators after a cooling-off period. Continue reading

Exam AlertEffective June 26, 2015, FINRA will alter its rules regarding who will be considered a public or non-public arbitrator. The change will make it so that any arbitrator who has worked in the financial industry for any period of time will be considered a non-public arbitrator. Also, arbitrators who represent investors or the financial industry as a significant part of their business will be considered non-public arbitrators, but may become public arbitrators after a cooling-off period. The cooling-off period lasts five years if they were disqualified from being a public arbitrator based on their own actions. The cooling-off period lasts two years if they were disqualified from being a public arbitrator based on someone else’s actions.

Source: SEC Approves Amendments to Arbitration Codes to Revise the Definitions of Non-Public and Public Arbitrator

This alert applies to the Series 6, Series 7, Series 24, Series 26, Series 27, Series 28, Series 62, Series 79, and Series 82.

Study Question of the Month – June

This month’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 24, 26, 27, 28, 62, and 99. –ANSWER POSTED– Continue reading

This month’s study question from the Solomon Online Exam Simulator question database is now available.

***Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card.***

Study Question

Question (Relevant to the Series 24Series 26Series 27, Series 28, Series 62, and Series 99):

Which of the following is true regarding lost and stolen security reporting requirements?

I. All reports of securities that have been lost for one business day should be reported to the Commission

II. All reports of lost securities in which there is a substantial belief that theft was involved should be reported to the Commission

III. All reports of lost or stolen securities should be reported promptly to the FBI

IV. All reports of lost securities in which there is a substantial belief that theft was involved should be reported to the FBI

Answers:

A. I and III

B. II and IV

C. I and IV

D. II and III

Correct Answer: B. II and IV

Rationale: All reports in which there is substantial belief that theft was involved should be reported to the Commission within one business day of such a discovery. In addition, when there is believed to be criminal activity involved, it should be reported to the Federal Bureau of Investigation. Securities that have been lost for two business days should be reported to the Commission when criminal activity is not suspected.

Congratulations Roseann L., this month’s Study Question of the Month winner!

All study questions are from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Month – May

This month’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, 7, 24, 26, 27, and 28. –ANSWER POSTED– Continue reading

This month’s study question from the Solomon Online Exam Simulator question database is now available.

***Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card.***

Study Question

Question (Relevant to the Series 6, Series 7, Series 24, Series 26, Series 27, and Series 28):

According to the Code of Arbitration, excluding claims alleging discrimination or sexual harassment, arbitration of disputes is mandatory for all of the following except:

Answers:

A. Disputes between two member firms

B. Disputes brought by member firms against customers, if required by contract

C. Disputes brought by member firms against customers for claims in excess of $25,000

D. Disputes brought by associated persons against customers, if the customer consents

Correct Answer: C. Disputes brought by member firms against customers for claims in excess of $25,000

Rationale: Arbitration of disputes involving customers is mandatory only if the customer consents to arbitration or if required by contract. Claims alleging discrimination or sexual harassment cannot be arbitrated, except by agreement of all disputing parties.

(No winner this month. There were no correct answers submitted. Try back next month!)

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.