Temporary Hold

Hattie Grimshawe, 81, has an account at Verrowby Securities and named her stepson as her trusted contact person when she opened it. A supervisor at the firm develops a reasonable belief that a caller who has been directing activity in the account is financially exploiting her. Under the NASAA Model Act to Protect Vulnerable Adults from Financial Exploitation, the firm:

1. A.may notify the Administrator but must first obtain Grimshawe written consent, since the account is hersNo client consent is required. The notification duty exists precisely because the client may be under undue influence.
2. B.must notify only Adult Protective Services, because the state securities Administrator has no role in elder exploitation mattersThe model act names the securities Administrator alongside Adult Protective Services as a required recipient.
3. C.must promptly notify the Administrator and Adult Protective Services, and may also notify the trusted contact personCorrect. Regulator and Adult Protective Services notification is mandatory; trusted contact notification is permissive.
4. D.must notify the trusted contact person first, and may notify the Administrator only if the stepson does not resolve the matterThis reverses the structure. Trusted contact notification is optional and does not gate the required notifications.

Why: The model act separates a mandatory step from a permissive one. A qualified individual who reasonably believes that financial exploitation of an eligible adult has occurred, has been attempted, or is being attempted must promptly notify both the state securities Administrator and Adult Protective Services. Notifying a trusted contact person is permitted rather than required, and no notification may be made to a person the firm suspects of the exploitation.

Ravenshill Securities forms a reasonable belief that an 82-year-old customer is the victim of financial exploitation and places a temporary hold on a requested disbursement. Under FINRA Rule 2165, the initial hold may last up to:

1. A.15 business days, extendable by up to 10 additional business days if the firm's internal review supports its beliefCorrect. Fifteen business days is the initial ceiling, with a supported ten-business-day extension available.
2. B.30 calendar days, with no extension availableThe rule counts in business days, not calendar days, and it does provide for an extension when the internal review supports the belief.
3. C.10 business days, extendable by up to 15 additional business daysThe two periods are reversed. The longer stretch comes first, so the firm has time to investigate before deciding whether to extend.
4. D.An indefinite period, until a state agency or court responds to the firm's reportAn open-ended hold would cut the customer off from her own money without limit. Any further extension after a report to an agency or court is itself bounded by the rule.

Why: Rule 2165 permits an initial temporary hold of up to 15 business days from the date it is first placed. If the member's internal review of the facts supports its reasonable belief that exploitation has occurred, is occurring, has been attempted or will be attempted, the hold may be extended by up to 10 additional business days.

A representative believes an 80-year-old customer is being financially exploited by a new acquaintance pressuring her to wire out the proceeds of her fund holdings. Under FINRA financial exploitation rule for specified adults, the firm may:

1. A.Take no action unless it first obtains a court orderThe safe harbor exists precisely so firms can act quickly without waiting for courts or regulators.
2. B.Place a temporary hold on the disbursement (initially up to 15 business days), notify the trusted contact, and conduct an internal reviewCorrect - this is the Rule 2165 safe harbor: temporary hold, notification, and prompt internal review.
3. C.Reverse the customer prior instructions and reinvest the withdrawn fundsThe firm may pause suspicious disbursements; it has no authority to reverse completed instructions or trade without authorization.
4. D.Permanently freeze the account until the customer passes a competency examinationThe rule authorizes only temporary, disbursement-focused holds - no permanent freezes or competency testing.

Why: When the firm reasonably believes financial exploitation of a specified adult is occurring or will be attempted, it may place a temporary hold on the suspicious disbursement (initially up to 15 business days), notify the trusted contact (and parties authorized on the account, unless they are the suspected exploiters), and conduct an internal review. Review: FINRA Rule 2165.

A firm's service desk receives a disbursement request on an elderly customer's account that raises concerns about possible financial exploitation. What tool is available to the firm to address this concern operationally?

1. A.The firm must immediately and permanently close the account rather than process any further activity.Wrong. Closing the account is not the tool available for addressing a suspected exploitation concern on a specific disbursement.
2. B.The firm may place a temporary hold on the disbursement while it investigates, notifying the customer's trusted contact person and any other authorized parties as appropriate, rather than either processing the request automatically or refusing it outright with no further action.Correct. A temporary hold with trusted contact notification is the calibrated response to a suspected exploitation concern.
3. C.The firm must process the disbursement exactly as requested, since it has no authority to delay or question a customer's own instruction under any circumstances.Wrong. The firm does have authority to place a temporary hold when it reasonably suspects exploitation.
4. D.The firm must contact law enforcement before taking any other action, and may not place a hold on the disbursement until law enforcement responds.Wrong. The firm may place a temporary hold on its own initiative; it is not required to wait for law enforcement before doing so.

Why: A temporary hold on a disbursement is a specific tool available when a firm has a reasonable basis to suspect financial exploitation, letting it pause the request while investigating rather than being forced into an all-or-nothing choice between processing a potentially harmful disbursement or taking the drastic step of closing the account. Part of using this tool appropriately includes notifying the customer's trusted contact person and any other authorized parties, which is precisely why that contact information is collected in the first place.