[Federal Register Volume 86, Number 245 (Monday, December 27, 2021)]
[Notices]
[Pages 73278-73279]
[FR Doc No: 2021-28047]

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ENVIRONMENTAL PROTECTION AGENCY

[EPA-HQ-OAR-2020-0638; FRL-9385-01-OMS]

Information Collection Request Submitted to OMB for Review and
Approval; Comment Request; National Emission Standards for Hazardous
Air Pollutants (NESHAP) for Leather Finishing Operations) (Renewal)

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice.

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SUMMARY: The Environmental Protection Agency (EPA) has submitted an
information collection request (ICR), National Emission Standards for
Hazardous Air Pollutants (NESHAP) for Leather Finishing Operations (EPA
ICR Number 1985.10, OMB Control Number 2060-0478), to the Office of
Management and Budget (OMB) for review and approval in accordance with
the Paperwork Reduction Act. This is a proposed extension of the ICR,
which is currently approved through February 28, 2022. Public comments
were previously requested, via the Federal Register, on February 8,
2021 during a 60-day comment period. This notice allows for an
additional 30 days for public comments. A fuller description of the ICR
is given below, including its estimated burden and cost to the public.
An agency may not conduct or sponsor and a person is not required to
respond to a collection of information unless it

displays a currently-valid OMB control number.

DATES: Additional comments may be submitted on or before January 26,
2022.

ADDRESSES: Submit your comments, referencing Docket ID Number EPA-HQ-
OAR-2020-0638, online using www.regulations.gov (our preferred method)
or by mail to EPA Docket Center, Environmental Protection Agency, Mail
Code 28221T, 1200 Pennsylvania Ave. NW, Washington, DC 20460.
    EPA's policy is that all comments received will be included in the
public docket without change including any personal information
provided, unless the comment includes profanity, threats, information
claimed to be Confidential Business Information (CBI), or other
information whose disclosure is restricted by statute.
    Submit written comments and recommendations to OMB for the proposed
information collection within 30 days of publication of this notice to
www.reginfo.gov/public/do/PRAMain. Find this particular information
collection by selecting ``Currently under 30-day Review--Open for
Public Comments'' or by using the search function.

FOR FURTHER INFORMATION CONTACT: Muntasir Ali, Sector Policies and
Program Division (D243-05), Office of Air Quality Planning and
Standards, U.S. Environmental Protection Agency, Research Triangle
Park, North Carolina 27711; telephone number:<PHONE_NUMBER>; email
address: [email protected].

SUPPLEMENTARY INFORMATION: Supporting documents, which explain in
detail the information that the EPA will be collecting, are available
in the public docket for this ICR. The docket can be viewed online at
https://www.regulations.gov, or in person at the EPA Docket Center, WJC
West Building, Room 3334, 1301 Constitution Ave. NW, Washington, DC.
The telephone number for the Docket Center is<PHONE_NUMBER>. For
additional information about EPA's public docket, visit: https://www.epa.gov/dockets.
    Abstract: The National Emission Standards for Hazardous Air
Pollutants (NESHAP) for Leather Finishing Operations (40 CFR part 63,
subpart TTTT) apply to existing and new leather finishing facilities
that are major sources of HAP or are collocated with other sources that
are individually or collectively a major source of HAP emissions.
Owners and operators of affected facilities are required to submit
initial notifications, performance tests, and periodic reports. They
are also required to maintain records of the occurrence and duration of
any startup, shutdown, or malfunction in the operation of an affected
facility, or any period during which the monitoring system is
inoperative. These notifications, reports, and records are used by the
EPA to determine compliance with these standards.
    Form Numbers: None.
    Respondents/affected entities: Leather finishing operations.
    Respondent's obligation to respond: Mandatory (40 CFR part 63,
subpart TTTT).
    Estimated number of respondents: 4 (total).
    Frequency of response: Initially, occasionally and annually.
    Total estimated burden: 138 hours (per year). Burden is defined at
5 CFR 1320.3(b).
    Total estimated cost: $16,300 (per year), which includes $0 in
annualized capital/startup expense and/or operation & maintenance
costs.
    Changes in the Estimates: There is an adjustment increase in the
total estimated burden as currently identified in the OMB Inventory of
Approved Burdens. This increase is not due to any program changes. The
change in the burden and cost estimates occurred because the previous
ICR assumed that respondents would only need to familiarize with the
regulatory requirements once, during the year in which rule revisions
occurred, and omitted familiarization with the regulatory requirements
in the years following. This ICR assumes that respondents will need to
familiarize with the regulatory requirements every year. The overall
result is a small increase in burden hours and costs. Aside from this
minor change in burden hours, the only other change is due to a slight
increase in costs, which is wholly due to the use of updated labor
rates. This ICR uses labor rates from the most-recent Bureau of Labor
Statistics report (September 2020) to calculate respondent burden
costs.

Courtney Kerwin,
Director, Regulatory Support Division.
[FR Doc. 2021-28047 Filed 12-23-21; 8:45 am]
BILLING CODE 6560-50-P


[Federal Register Volume 82, Number 26 (Thursday, February 9, 2017)]
[Notices]
[Pages 10059-10070]
[FR Doc No: 2017-02645]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79964; File No. SR-FINRA-2016-039]

Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Partial Amendment No. 1 and Order
Granting Accelerated Approval of the Proposed Rule Change To Amend Rule
4512 (Customer Account Information) and Adopt FINRA Rule 2165
(Financial Exploitation of Specified Adults), as Modified by Partial
Amendment No. 1

February 3, 2017.

I. Introduction

    On October 19, 2016, the Financial Industry Regulatory Authority,
Inc. (``FINRA'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend FINRA Rule 4512
(Customer Account Information) and adopt new FINRA Rule 2165 (Financial
Exploitation of Specified Adults). The proposed rule change would: (1)

Require members to make reasonable efforts to obtain the name of and
contact information for a trusted contact person for a customer's
account; and (2) permit members to place temporary holds on
disbursements of funds or securities from the accounts of specified
customers, where there is a reasonable belief that these customers have
been, are being, or will be subject to financial exploitation).\3\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See File No. SR-FINRA-2016-039.
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    The proposed rule change was published for comment in the Federal
Register on November 7, 2016.\4\ The public comment period closed on
November 28, 2016. The Commission received twenty-one (21) comment
letters on the Proposal.\5\ On December 7, 2016, FINRA extended the
time period in which the Commission must approve the Proposal,
disapprove the Proposal, or institute proceedings to determine whether
to approve or disapprove the Proposal to February 3, 2017.\6\ On
January 19, 2017, FINRA filed a response to the comment letters,\7\
along with Partial Amendment No. 1 to the Proposal.
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    \4\ See Notice of Filing of a Proposed Rule Change To Amend Rule
4512 (Customer Account Information) and Adopt FINRA Rule 2165
(Financial Exploitation of Specified Adults), Exchange Act Release
No. 34-79215; File No. SR-FINRA-2016-039 (Nov. 1, 2016); 81 FR 78238
(Nov. 7, 2016) (``Proposal'').
    \5\ See Tamra K. Solmon, Associate General Counsel, Investment
Company Institute (``ICI'') (Nov. 28, 2016); Gary Sanders, Counsel
and Vice President, Government Relations, National Association of
Insurance and Financial Advisors (``NAIFA'') (Nov. 28, 2016);
Catherine J. Weatherford, President & CEO, Insured Retirement
Institute (``IRI'') (Nov. 28 2016); Eric Arnold and Clifford Kirsch,
Sutherland, Asbill & Brennan LLP, on behalf of the Committee of
Annuity Insurers (``CAI'') (Nov. 28, 2016); Robert J. McCarthy,
Director of Regulatory Policy, Wells Fargo Advisors (``Wells
Fargo'') (Nov. 28, 2016); W. Alan Smith, Deputy General Counsel,
Janney Montgomery Scott LLC, Philadelphia, PA (``Janney'') (Nov. 28,
2016); William A. Jacobson, Clinical Professor of Law, Cornell Law
School and Director, Cornell Securities Law Clinic, and Alexander K.
Brehan, 2017 J.D. Candidate, Cornell Law School (``Cornell'') (Nov.
28, 2016); Nicole G. Iannarone, Director, Investor Advocacy Clinic,
Assistant Clinical Professor, and David Hsu, Student Intern, Georgia
State University College of Law (``GSU'') (Nov. 28, 2016); Carrie L.
Chelko, Esq., Chief Counsel, Lincoln Financial Network (``Lincoln'')
(Nov. 28, 2016); David T. Bellaire, Esq., Executive Vice President
and General Counsel, Financial Services Institute (``FSI'') (Nov.
28, 2016); Marnie C. Lambert, President, Public Investors
Arbitration Bar Association, Norman, OK (``PIABA'') (Nov. 28, 2016);
Lisa J. Bleier, Managing Director and Associate General Counsel,
SIFMA, Washington, DC (Nov. 28, 2016); Atasia Richardson and Alyse
Velger, Student Interns, and Elissa Germaine, Supervising Attorney,
Pace Investor Rights Clinic, Elisabeth Haub School of Law, Pace
University, White Plains, NY (``PIRC'') (Nov. 28, 2016); Mike
Rothman, President, NASAA, and Minnesota Commissioner of Commerce
(``NASAA'') (Nov. 28, 2016); Richard Foster, Financial Services
Roundtable, Washington, DC (``FSR'') (Nov. 28, 2016); David P.
Bergers, General Counsel, LPL Financial LLC (``LPL'') (Nov. 28,
2016); Jigar Gandhi, Counsel, American Counsel of Life Insurers
(``ACLI'') (Nov. 28, 2016); Michael Nicholas, Chief Executive
Officer, Bond Dealers of America (``BDA'') (Nov. 28, 2016); Jesse
Hill, Principal, Government and Regulatory Relations, Edward Jones
(``Edward Jones'') (Nov. 28, 2016); Manisha Kimmel, Chief Regulatory
Officer, Wealth Management, Thomson Reuters (``Thomson Reuters'')
(Dec. 5, 2016); and Rick Fleming, Investor Advocate, U.S. Securities
and Exchange Commission, Office of the Investor Advocate (``Investor
Advocate'') (Dec. 28, 2016). The comment letters are available on
FINRA's Web site at http://www.finra.org, at the principal office of
FINRA, at the Commission's Web site at https://www.sec.gov/comments/sr-finra-2016-039/finra2016039.shtml, and at the Commission's Public
Reference Room.
    \6\ See Letter from Jeanette Wingler, Associate General Counsel,
FINRA, to Katherine England, Assistant Director, Division of Trading
and Markets, Securities and Exchange Commission, dated December 7,
2016.
    \7\ See Letter from Jeanette Wingler, Associate General Counsel,
FINRA, to Brent J. Fields, Secretary, Securities and Exchange the
Commission, dated January 19, 2017 (``FINRA Response Letter''). The
FINRA Response Letter and the text of Partial Amendment No. 1 are
available on FINRA's Web site at http://www.finra.org, at the
principal office of FINRA, at the Commission's Web site at https://www.sec.gov/comments/sr-finra-2016-039/finra2016039.shtml, and at
the Commission's Public Reference Room.
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    This order provides notice of the filing of Partial Amendment No. 1
and approves the Proposal, as modified by Partial Amendment No. 1, on
an accelerated basis.

II. Description of the Proposal \8\
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    \8\ The subsequent description of the Proposal is substantially
excerpted from FINRA's description in the Proposal. See Proposal, 81
FR at 78238-78257.
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A. Background

    With the aging of the U.S. population, financial exploitation of
seniors and other vulnerable adults is a serious and growing
problem.\9\ FINRA's experience with the FINRA Securities Helpline for
Seniors[supreg] (``Seniors Helpline'') has highlighted issues relating
to financial exploitation of seniors and other vulnerable adults.\10\ A
number of reports and studies also have explored various aspects of
this important topic.\11\ Moreover, studies indicate that financial
exploitation is the most common form of elder abuse.\12\ Financial
exploitation can be difficult for any investor, but it can be
particularly devastating for seniors and other vulnerable adults, many
of whom are living on fixed incomes without the ability to offset
significant losses over time or through other means.\13\ Financial
exploitation can occur suddenly, and once funds leave an account they
can be difficult, if not impossible, to recover, especially when they
ultimately are transferred outside of the U.S.\14\ Members need more
effective tools that will allow them to quickly and effectively address
suspected financial exploitation of seniors and other vulnerable
adults. Currently, however, FINRA rules do not explicitly permit
members to contact a non-account holder or to place a temporary hold on
disbursements of funds or securities where there is a reasonable belief
of financial exploitation of a senior or other vulnerable adult.
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    \9\ See The MetLife Study of Elder Financial Abuse: Crimes of
Occasion, Desperation, and Predation Against America's Elders (June
2011) (discussing the increasing prevalence of elder financial
abuse) (hereinafter ``MetLife Study''). See also FINRA Investor
Education Foundation, Financial Fraud and Fraud Susceptibility in
the United States: Research Report from a 2012 National Survey
(2013) (which found that U.S. adults age 65 and older are more
likely to be targeted for financial fraud, including investment
scams, and more likely to lose money once targeted) (hereinafter
``FINRA Foundation Study'').
    \10\ See FINRA Launches Toll-Free FINRA Securities Helpline for
Seniors (April 20, 2015). See also Report on the FINRA Securities
Helpline for Seniors (December 2015) (stating that from its launch
on April 20, 2015 until December 2015, the Seniors Helpline received
more than 2,500 calls with an average call duration of nearly 25
minutes) (hereinafter ``Seniors Helpline Report''); FINRA Securities
Helpline for Seniors Marks First Year, with $1.3 Million Returned to
Investors (April 20, 2016) (stating that, ``To date, the helpline
has fielded more than 4,200 calls, recovering over $1.3 million in
voluntary reimbursements from firms since its launch in April
2015'').
    \11\ See, e.g., National Senior Investor Initiative: A
Coordinated Series of Examinations, SEC's Office of Compliance
Inspections and Examinations and FINRA (April 15, 2015) (hereinafter
``Senior Investor Initiative''); MetLife Study; and Seniors Helpline
Report.
    \12\ See Interagency Guidance on Privacy Laws and Reporting
Financial Abuse of Older Adults, Board of Governors of the Federal
Reserve System, Commodity Futures Trading Commission, Consumer
Financial Protection Bureau, Federal Deposit Insurance Corp.,
Federal Trade Commission, National Credit Union Administration,
Office of the Comptroller of the Currency and SEC (September 24,
2013) (hereinafter ``Interagency Guidance'') (citing Acierno, R., M.
A. Hernandez, A. B. Amstadter, H. S. Resnick, K. Steve, W. Muzzy,
and D. G. Kilpatrick, ``Prevalence and Correlates of Emotional,
Physical, Sexual and Financial Abuse and Potential Neglect in the
United States: The National Elder Mistreatment Study,'' American
Journal of Public Health 100(2): 292-97; Lifespan of Greater
Rochester, Inc., et al., Under the Radar: New York State Elder Abuse
Prevention Study, (Rochester, NY: Lifespan of Greater Rochester,
Inc., May 2011)) (hereinafter ``New York State Elder Abuse
Prevention Study'').
    \13\ See Seniors Helpline Report.
    \14\ See Seniors Helpline Report.
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    To address these issues, the Proposal would provide members with a
way to quickly respond to situations in which they have a reasonable
basis to believe that financial exploitation of vulnerable adults has
occurred or will be attempted. FINRA believes that a member can better
protect its customers from financial exploitation if the member can:
(1) Place a temporary hold on a disbursement of funds or securities
from a customer's account; and (2)

notify a customer's trusted contact person when there is concern that,
among other things, the customer may be the victim of financial
exploitation. These measures will assist members in thwarting financial
exploitation of seniors and other vulnerable adults before potentially
ruinous losses occur. As discussed below, FINRA is proposing a number
of safeguards to help ensure that there is not a misapplication of the
Proposal and that customers' ordinary disbursements are not disrupted.
    According to FINRA, a small number of states have enacted statutes
that permit financial institutions, including broker-dealers, to place
temporary holds on ``disbursements'' or ``transactions'' if financial
exploitation of covered persons is suspected.\15\ In addition, the
North American Securities Administrators Association (``NASAA'')
created a model state act to protect vulnerable adults from financial
exploitation (``NASAA model''). Due to the small number of state
statutes currently in effect and the lack of a federal standard in this
area, FINRA believes that the Proposal would aid in the creation of a
uniform national standard for the benefit of members and their
customers.
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    \15\ See, e.g., DEL. CODE ANN. tit. 31, Sec.  3910 (2015); MO.
REV. STAT. Sec. Sec.  409.600-.630 (2015); WASH. REV. CODE
Sec. Sec.  74.34.215, 220 (2015); and IND. CODE ANN. Sec.  23-19-4.1
(2016).
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B. Terms of the Proposal

1. Trusted Contact Person
    The Proposal would amend Rule 4512 to require members to make
reasonable efforts to obtain the name of and contact information for a
trusted contact person upon the opening of a non-institutional
customer's account.\16\ It would also require that the trusted contact
person be age 18 or older.\17\ While the Proposal did not specify what
contact information should be obtained for a trusted contact person,
FINRA noted that a mailing address, telephone number and email address
for the trusted contact person may be the most useful information for
members.
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    \16\ See proposed Rule 4512(a)(1)(F).
    \17\ See proposed Rule 4512(a)(1)(F).
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    The Proposal would not prohibit members from opening and
maintaining an account if a customer fails to identify a trusted
contact person as long as the member made reasonable efforts to obtain
a name and contact information.\18\ FINRA stated that asking a customer
to provide the name and contact information for a trusted contact
person ordinarily would constitute reasonable efforts to obtain the
information and would satisfy the Proposal's requirements.
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    \18\ See proposed Supplementary Material .06(b) to Rule 4512.
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    The Proposal would not require a member to attempt to obtain the
name of and contact information for a trusted contact person for
accounts in existence prior to the effective date of the Proposal
(``existing accounts'') until such time as the member updates the
information for the account either in the course of the member's
routine and customary business or as otherwise required by applicable
laws or rules.\19\ With respect to any account subject to the
requirements of Exchange Act Rule 17a-3(a)(17) to periodically update
customer records, the Proposal would require a member to make
reasonable efforts to obtain or, if previously obtained, to update
where appropriate, the name and contact information for a trusted
contact person in the manner and timeframes required under Exchange Act
Rule 17a-3(a)(17).\20\ With regard to updating the contact information
once provided for other accounts that are not subject to the
requirements in Exchange Act Rule 17a-3, FINRA stated that a member
should consider asking the customer to review and update the name of
and contact information for a trusted contact person on a periodic
basis or when there is a reason to believe that there has been a change
in the customer's situation.\21\
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    \19\ See Rule 4512(b).
    \20\ See proposed Supplementary Material .06(c) to Rule 4512.
The reference to the requirements of Rule 17a-3(a)(17) includes the
requirements of Rule 17a-3(a)(17)(i)(A) in conjunction with Rule
17a-3(a)(17)(i)(D). In this regard, Rule 17a-3(a)(17)(i)(D) provides
that the account record requirements in Rule 17a-3(a)(17)(i)(A) only
apply to accounts for which the member, broker or dealer is, or has
within the past 36 months been, required to make a suitability
determination under the federal securities laws or under the
requirements of a self-regulatory organization of which it is a
member.
    \21\ A customer's request to change his or her trusted contact
person may be a possible red flag of financial exploitation. For
example, a senior customer instructing his registered representative
to change his trusted contact person from an immediate family member
to a previously unknown third party may be a red flag of financial
exploitation.
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    The Proposal would also require, at the time of account opening, a
member to disclose in writing (which may be electronic) to the customer
that the member or an associated person is authorized to contact the
trusted contact person and disclose information about the customer's
account to address possible financial exploitation, to confirm the
specifics of the customer's current contact information, health status,
or the identity of any legal guardian, executor, trustee or holder of a
power of attorney, or as otherwise permitted by proposed Rule 2165.
With respect to any account that was opened pursuant to a prior FINRA
rule, a member would be required to provide this disclosure in writing,
which may be electronic, when updating the information for the account
pursuant to Rule 4512(b) either in the course of the member's routine
and customary business or as otherwise required by applicable laws or
rules.\22\
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    \22\ See proposed Supplementary Material .06(a) to Rule 4512. A
member would be required to provide the disclosure at account
opening or when updating information for existing accounts pursuant
to Rule 4512(b), even if a customer fails to identify a trusted
contact person. Among other things, such disclosure may assist a
customer in making an informed decision about whether to provide the
trusted contact person information.
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    FINRA believes that members and customers will benefit from the
trusted contact information in many different settings. For example,
consistent with the disclosure, if a member has been unable to contact
a customer after multiple attempts, a member could contact a trusted
contact person to inquire about the customer's current contact
information. Or if a customer is known to be ill or infirm and the
member has been unable to contact the customer after multiple attempts,
the member could contact a trusted contact person to inquire about the
customer's health status. A member also could reach out to a trusted
contact person if it suspects that the customer may be suffering from
Alzheimer's disease, dementia or other forms of diminished capacity. A
member could contact a trusted contact person to address possible
financial exploitation of the customer before placing a temporary hold
on a disbursement. In addition, as discussed below, pursuant to
proposed Rule 2165, when information about a trusted contact person is
available, a member must notify the trusted contact person orally or in
writing, which may be electronic, if the member has placed a temporary
hold on a disbursement of funds or securities from a customer's
account, unless the member reasonably believes that the trusted contact
person is engaged in the financial exploitation.\23\
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    \23\ See proposed Rule 2165(b)(1)(B)(ii).
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    The trusted contact person is intended to be a resource for the
member in administering the customer's account, protecting assets and
responding to possible financial exploitation. A member may use its
discretion in relying on any information provided by the trusted
contact person. A member may elect to notify an individual that he or
she was named as a trusted contact person; however, the

Proposal would not require such notification.
2. Temporary Hold on Disbursement of Funds or Securities
    The Proposal would permit a member that reasonably believes that
financial exploitation may be occurring to place a temporary hold on
the disbursement of funds or securities from the account of a
``specified adult'' customer.\24\ The Proposal would create no
obligation to withhold a disbursement of funds or securities where
financial exploitation may be occurring. In this regard, Supplementary
Material to proposed Rule 2165 would explicitly state that the Rule
provides members with a safe harbor from FINRA Rules 2010 (Standards of
Commercial Honor and Principles of Trade), 2150 (Improper Use of
Customers' Securities or Funds; Prohibition Against Guarantees and
Sharing in Accounts) and 11870 (Customer Account Transfer Contracts)
``when members exercise discretion in placing temporary holds on
disbursements of funds or securities from the accounts of specified
adults under the circumstances denoted in the Rule.'' \25\ The proposed
safe harbor would not apply to a decision not to place a hold; rather,
as stated in the proposed rule, members would be provided with a safe
harbor from certain FINRA rules when exercising their discretion to
place a temporary hold. The proposed Supplementary Material would
further state that the Rule does not require members to place temporary
holds on disbursements of funds or securities from the account of a
specified adult.\26\
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    \24\ See proposed Rule 2165(b)(1). Members also must consider
any obligations under FINRA Rule 3310 (Anti-Money Laundering
Compliance Program) and the reporting of suspicious transactions
required under 31 U.S.C. 5318(g) and the implementing regulations
thereunder.
    \25\ See proposed Supplementary Material .01 to Rule 2165. As
discussed further below, Partial Amendment No. 1 clarifies the scope
of Supplementary Material .01 to Rule 2165 by adding the words
``associated persons'' to the Proposal's safe harbor, and by
providing that the safe harbor is available when members exercise
discretion in placing a temporary hold ``consistent with the
requirements of this Rule.
    \26\ See proposed Supplementary Material .01 to Rule 2165. FINRA
understands that some members, pursuant to state law or their own
policies, may already place temporary holds on disbursements from
customers' accounts where financial exploitation is suspected.
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    FINRA believes that ``specified adults'' may be particularly
susceptible to financial exploitation.\27\ Proposed Rule 2165 would
define ``specified adult'' as: (A) A natural person age 65 and older;
\28\ or (B) a natural person age 18 and older who the member reasonably
believes has a mental or physical impairment that renders the
individual unable to protect his or her own interests.\29\
Supplementary Material to proposed Rule 2165 would provide that a
member's reasonable belief that a natural person age 18 and older has a
mental or physical impairment that renders the individual unable to
protect his or her own interests may be based on the facts and
circumstances observed in the member's business relationship with the
person.\30\ The Proposal would define the term ``account'' to mean any
account of a member for which a specified adult has the authority to
transact business.\31\
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    \27\ See Senior Investor Initiative (noting the increase in
persons aged 65 and older living in the United States and the
concentration of wealth in those persons during a time of downward
yield pressure on conservative income-producing investments). See
also FINRA Foundation Study (noting that respondents age 65 and over
were more likely to be solicited to invest in a potentially
fraudulent opportunity (93%), more likely to engage with the offer
(49%) and more likely to have lost money (16%) than younger
respondents); MetLife Study (noting the many forms of vulnerability
that ``make elders more susceptible to [financial] abuse,''
including, among others, poor physical or mental health, lack of
mobility, and isolation); Protecting Elderly Investors from
Financial Exploitation: Questions to Consider (February 5, 2015)
(noting that one of the greatest risk factors for diminished
capacity is age).
    \28\ See, e.g., Aging Statistics, U.S. Department of Health and
Human Services Administration on Aging (referring to the ``older
population'' as persons ``65 years or older''); Senior Investor
Initiative (noting the examinations underlying the report ``focused
on investors aged 65 years old or older'').
    \29\ See proposed Rule 2165(a)(1).
    \30\ See proposed Supplementary Material .03 to Rule 2165. A
member also may rely on other sources of information in making a
determination under proposed Rule 2165(a)(1) (e.g., a court or
government agency order finding a customer to be legally
incompetent).
    \31\ See proposed Rule 2165(a)(2).
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    Because financial abuse may take many forms, FINRA has proposed a
broad definition of ``financial exploitation.'' Specifically, financial
exploitation would mean: (A) The wrongful or unauthorized taking,
withholding, appropriation, or use of a specified adult's funds or
securities; or (B) any act or omission by a person, including through
the use of a power of attorney, guardianship, or any other authority,
regarding a specified adult, to: (i) Obtain control, through deception,
intimidation or undue influence, over the specified adult's money,
assets or property; or (ii) convert the specified adult's money, assets
or property.\32\
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    \32\ See proposed Rule 2165(a)(4).
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    The Proposal would permit a member to place a temporary hold on a
disbursement of funds or securities from the account of a specified
adult if the member reasonably believes that financial exploitation of
the specified adult has occurred, is occurring, has been attempted or
will be attempted.\33\ A temporary hold pursuant to proposed Rule 2165
may be placed on a particular suspicious disbursement(s) but not on
other, non-suspicious disbursements.\34\ The Proposal would not apply
to transactions in securities.\35\
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    \33\ See proposed Rule 2165(b)(1)(A).
    \34\ FINRA recognizes that a single disbursement could involve
all of the assets in an account.
    \35\ For example, the Proposal would not apply to a customer's
order to sell his shares of a stock. However, if a customer
requested that the proceeds of a sale of shares of a stock be
disbursed out of his account at the member, then the Proposal could
apply to the disbursement of the proceeds where the customer is a
``specified adult'' and there is reasonable belief of financial
exploitation.
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    The Proposal would require that a member's written supervisory
procedures identify the title of each person authorized to place,
terminate or extend a temporary hold on behalf of the member pursuant
to Rule 2165. The Proposal would require that any such person be an
associated person of the member who serves in a supervisory, compliance
or legal capacity for the member.\36\
---------------------------------------------------------------------------

    \36\ See proposed Rule 2165(c)(2). This provision is intended to
ensure that a member's decision to place a temporary hold is
elevated to an associated person with appropriate authority.
---------------------------------------------------------------------------

    If a member places a temporary hold, the Proposal would require the
member to immediately initiate an internal review of the facts and
circumstances that caused the member to reasonably believe that
financial exploitation of the specified adult has occurred, is
occurring, has been attempted or will be attempted.\37\ In addition,
the Proposal would require the member to provide notification of the
hold and the reason for the hold to all parties authorized to transact
business on the account, including, but not limited to, the customer,
and, if available, the trusted contact person, no later than two
business days after the date that the member first placed the hold.\38\
While oral or written (including electronic) notification would be
permitted under the Proposal, a member would be required to retain
records evidencing the notification.\39\
---------------------------------------------------------------------------

    \37\ See proposed Rule 2165(b)(1)(C).
    \38\ See proposed Rule 2165(b)(1)(B). FINRA understands that a
member may not necessarily be able to speak with or otherwise get a
response from such persons within the two-business-day period. FINRA
would consider, for example, a member's mailing a letter, sending an
email, or placing a telephone call and leaving a message with
appropriate person(s) within the two-business-day period to
constitute notification for purposes of proposed Rule 2165.
Moreover, as further discussed herein, FINRA would consider the
inability to contact a trusted contact person to mean that the
trusted contact person was not available for purposes of the Rule.
    \39\ See proposed Rule 2165(d).

---------------------------------------------------------------------------

    The Proposal would not preclude a member from terminating a
temporary hold after communicating with either the customer or trusted
contact person. FINRA believes that a customer's objection to a
temporary hold or information obtained during an exchange with the
customer or trusted contact person may be used in determining whether a
hold should be placed or lifted. FINRA believes that, while not
dispositive, members should weigh a customer's objection against other
information in determining whether a hold should be placed or lifted.
    While the Proposal would not require notifying the customer's
registered representative of suspected financial exploitation, a
customer's registered representative may be the first person to detect
potential financial exploitation. If the detection occurs in another
way, a member may choose to notify and discuss the suspected financial
exploitation with the customer's registered representative.
    For purposes of proposed Rule 2165, FINRA would consider the lack
of an identified trusted contact person, the inability to contact the
trusted contact person or a person's refusal to act as a trusted
contact person to mean that the trusted contact person was not
available.\40\ A member may use the temporary hold provision under
proposed Rule 2165 when a trusted contact person is not available.
---------------------------------------------------------------------------

    \40\ Moreover, as discussed below, Partial Amendment No. 1
provides an exception from the proposed requirement in Rule 2165 to
notify not later than two business days after placing a temporary
hold all parties authorized to transact business on an account if a
party is unavailable or if the member reasonably believes that the
party has engaged, is engaged, or will engage in the financial
exploitation of a Specified Adult.
---------------------------------------------------------------------------

    The temporary hold authorized by proposed Rule 2165 would expire
not later than 15 business days after the date that the member first
placed the temporary hold on the disbursement of funds or securities,
unless sooner terminated or extended by an order of a state regulator
or agency or court of competent jurisdiction.\41\ In addition, provided
that the member's internal review of the facts and circumstances
supports its reasonable belief that the financial exploitation of the
specified adult has occurred, is occurring, has been attempted or will
be attempted, the Proposal would permit the member to extend the
temporary hold for an additional 10 business days, unless sooner
terminated or extended by an order of a state regulator or agency or
court of competent jurisdiction.\42\
---------------------------------------------------------------------------

    \41\ See proposed Rule 2165(b)(2).
    \42\ See proposed Rule 2165(b)(3). As discussed below, Partial
Amendment No. 1 clarifies that a member may place a temporary hold
for up to 25 business days when the Rule's requirements are met,
unless the temporary hold is ``otherwise'' terminated or extended by
a state regulator or agency of competent jurisdiction or a court of
competent jurisdiction.
---------------------------------------------------------------------------

    Proposed Rule 2165 would require members to retain records related
to compliance with the Rule, which shall be readily available to FINRA,
upon request. Retained records required by the Proposal are records of:
(1) Requests for disbursement that may constitute financial
exploitation of a specified adult and the resulting temporary hold; (2)
the finding of a reasonable belief that financial exploitation has
occurred, is occurring, has been attempted or will be attempted
underlying the decision to place a temporary hold on a disbursement;
(3) the name and title of the associated person that authorized the
temporary hold on a disbursement; (4) notification(s) to the relevant
parties pursuant to the Rule; and (5) the internal review of the facts
and circumstances supporting the member's reasonable belief that the
financial exploitation of the specified adult has occurred, is
occurring, has been attempted or will be attempted.\43\
---------------------------------------------------------------------------

    \43\ See proposed Rule 2165(d).
---------------------------------------------------------------------------

    The Proposal would require a member that anticipates using a
temporary hold in appropriate circumstances to establish and maintain
written supervisory procedures reasonably designed to achieve
compliance with the Rule, including procedures on the identification,
escalation and reporting of matters related to financial exploitation
of specified adults.\44\ The Proposal would require that the member's
written supervisory procedures identify the title of each person
authorized to place, terminate or extend a temporary hold on behalf of
the member pursuant to the Rule.\45\ The Proposal would also require a
member that anticipates placing a temporary hold pursuant to the Rule
to develop and document training policies or programs reasonably
designed to ensure that associated persons comply with the requirements
of the Rule.\46\
---------------------------------------------------------------------------

    \44\ See proposed Rule 2165(c)(1).
    \45\ See proposed Rule 2165(c)(2).
    \46\ See proposed Supplementary Material .02 to Rule 2165.
---------------------------------------------------------------------------

C. Partial Amendment No. 1

    As discussed in FINRA's response to comments, infra, Partial
Amendment No. 1 makes the following changes to the Proposal: (1) It
clarifies the scope of Supplementary Material .01 to Rule 2165 by
adding the words ``associated persons'' to the Proposal's safe harbor,
and by providing that the safe harbor is available when members
exercise discretion in placing a temporary hold ``consistent with the
requirements of this Rule;'' (2) it clarifies that a member may place a
temporary hold for up to 25 business days when the Rule's requirements
are met, unless the temporary hold is ``otherwise'' terminated or
extended by a state regulator or agency of competent jurisdiction or a
court of competent jurisdiction; (3) it provides an exception from the
proposed requirement in Rule 2165 to notify not later than two business
days after placing a temporary hold all parties authorized to transact
business on an account if a party is unavailable or if the member
reasonably believes that the party has engaged, is engaged, or will
engage in the financial exploitation of a Specified Adult; and (4) it
extends the Proposal's implementation period from ``no later than 180
days following Commission approval'' to 12 months from Commission
approval.

III. Summary of Comments and FINRA's Responses

    The Commission received twenty-one (21) comment letters on the
Proposal,\47\ and a response letter from FINRA.\48\ Twenty (20)
commenters supported FINRA's efforts to protect seniors and other
vulnerable adults but offered suggested modifications as to various
aspects of the Proposal.\49\ The remaining commenter supported the
proposed amendments to Rule 4512 regarding a trusted contact person,
but opposed the proposed adoption of Rule 2165 that would permit
temporary holds on disbursements where there is a reasonable belief of
financial exploitation.\50\ Commenters' concerns and suggested
modifications to the Proposal, along with FINRA's corresponding
responses, are discussed by topic below.
---------------------------------------------------------------------------

    \47\ See supra note 5.
    \48\ See supra note 7.
    \49\ See ACLI, BDA, CAI, Edward Jones, GSU, FSI, FSR, ICI,
Investor Advocate, IRI, Janney, Lincoln, LPL, NAIFA, NASAA, PIABA,
PIRC, SIFMA, Thomson Reuters and Wells Fargo.
    \50\ See Cornell.
---------------------------------------------------------------------------

A. Comment Letters in Support of the Proposal

    As noted above, twenty (20) commenters generally supported FINRA's
Proposal.\51\ For instance, one commenter stated that adoption of
FINRA's Proposal would better enable its members ``to protect seniors
and

other vulnerable adults from financial exploitation,'' and ``to reach
out to a trusted contact person whenever the member suspects financial
exploitation of the account holder or when the member has concerns
about the account holder's ability to continue to handle his or her
financial affairs.'' \52\ Another commenter stated that the Proposal
was ``well-conceived to help member firms protect seniors.'' \53\ A
third commenter asserted that its members had been trying to obtain
trusted contact person information, and that the Proposal would provide
additional guidance to members, create uniform practices, and make
customers more willing to provide the information.\54\ This commenter
also supported the proposed temporary hold on disbursements, which, it
argued, would facilitate quick protection for vulnerable adults, while
promptly resolving concerns that might be unfounded.\55\
---------------------------------------------------------------------------

    \51\ See supra note 46.
    \52\ See ICI.
    \53\ See Janney.
    \54\ See FSI.
    \55\ Id.
---------------------------------------------------------------------------

    However, these twenty (20) commenters suggested modifications to
the Proposal. These suggested modifications, along with FINRA's
responses to the commenters, are addressed below.

B. Suggested Modifications to the Proposal

1. Trusted Contact Person
    As noted above, the Proposal would amend Rule 4512 to require
members to make reasonable efforts to obtain the name of and contact
information for a trusted contact person upon the opening of a non-
institutional customer's account. One commenter contended that, if a
customer refuses to provide the trusted contact person information,
Rule 4512 should require a member to maintain records of its reasonable
efforts to obtain the trusted contact person information and the
customer's refusal to provide the information.\56\ The commenter also
believed that the rule text should set forth the minimum contact
information that must be obtained (i.e., a name, telephone number,
mailing address, email and relationship to customer) and that the
information should be added to FINRA's new account application
template.\57\
---------------------------------------------------------------------------

    \56\ See PIRC.
    \57\ Id.
---------------------------------------------------------------------------

    In its Response Letter, FINRA acknowledged that Rule 4512 does not
specify the manner in which members should evidence compliance with the
rule, or what contact information should be obtained for a trusted
contact person.\58\ However, according to FINRA, because Rule 3110
(Supervision) requires members to have supervisory procedures in place
that are reasonably designed to achieve compliance with FINRA rules,
members would have the flexibility to reasonably design their
supervisory systems to achieve compliance with the Proposal's
requirements.\59\ To aid members in complying with the Proposal's
requirements, FINRA agreed to update its new account application
template to reflect the proposed amendments to Rule 4512.\60\
---------------------------------------------------------------------------

    \58\ See FINRA Response Letter.
    \59\ Id.
    \60\ Id.
---------------------------------------------------------------------------

a. Notification of Designation
    One commenter suggested modifying the proposed amendments to Rule
4512 to require members to notify an individual that he or she was
named as a trusted contact person.\61\ Another commenter recommended
that members voluntarily adopt a practice of notifying the trusted
contact person of his or her designation.\62\
---------------------------------------------------------------------------

    \61\ See GSU.
    \62\ See Investor Advocate.
---------------------------------------------------------------------------

    In response, FINRA states its belief that the ``administrative
burdens of requiring notification would outweigh the benefits.'' \63\
However, FINRA notes that a member may elect to notify a trusted
contact person of his or her designation (e.g., if the member
determines that notifying the trusted contact person may be helpful in
administering a customer account).\64\
---------------------------------------------------------------------------

    \63\ See FINRA Response Letter.
    \64\ Id.
---------------------------------------------------------------------------

b. Notification of Temporary Hold
    As discussed above, proposed Rule 2165 would require a member to
provide notification of a temporary hold and the reason for the hold to
the trusted contact person, if available, not later than two business
days after the date that the member first placed the hold. One
commenter recommended voluntary, rather than mandatory,
notification,\65\ while another asserted that a member should not be
required to notify the trusted contact person if the member determines
to lift the hold after speaking with all persons authorized to transact
business on the account.\66\
---------------------------------------------------------------------------

    \65\ See SIFMA.
    \66\ See FSR.
---------------------------------------------------------------------------

    In response, FINRA encourages members to attempt to resolve a
matter with a customer before placing a temporary hold, ``unless a
member reasonably believes that doing so would cause further harm to a
specified adult.'' \67\ According to FINRA, if a temporary hold is not
placed, there is no requirement in the rule to notify the trusted
contact person.\68\ However, once a member places a temporary hold on a
disbursement, FINRA believes a member should be required to notify a
trusted contact person.\69\ In addition, FINRA strongly encourages
members to notify the specified adult of the temporary hold as soon as
practicable but in no case longer than the two business days required
by Rule 2165.\70\
---------------------------------------------------------------------------

    \67\ See FINRA Response Letter.
    \68\ Id.
    \69\ Id.
    \70\ Id.
---------------------------------------------------------------------------

    Another commenter suggested that, rather than disclosing only that
the temporary hold was placed, members should have discretion to
disclose and discuss any information relevant to the financial
exploitation investigation to the trusted contact person.\71\ In its
Response Letter, FINRA states that ``the proposed amendments to Rule
4512 explicitly permit members to contact the trusted contact person
and disclose information about the customer's account to address
possible financial exploitation and as permitted by Rule 2165.'' \72\
According to FINRA, members are therefore permitted to disclose and
discuss information relevant to a financial exploitation investigation
to a trusted contact person.\73\
---------------------------------------------------------------------------

    \71\ See IRI.
    \72\ See FINRA Response Letter.
    \73\ Id.
---------------------------------------------------------------------------

c. Update
    As previously discussed, with respect to an account that was opened
pursuant to a prior FINRA rule (``existing account''), Rule 4512(b)
requires members to update the trusted contact information for the
account whenever they update the account information in the course of
their routine and customary business, or as required by other
applicable laws or rules. One commenter recommended a shorter recurring
timeframe (e.g., annually) during which members must reach out to their
non-institutional customers regarding the trusted contact person
information.\74\ In response, FINRA declined to make the suggested
change.\75\ FINRA states that applying the current standard in Rule
4512(b) to the trusted contact person information would ensure that
members use reasonable efforts to obtain the information for existing
accounts in the course of their routine business, while not imposing
undue burdens on

members to contact accountholders more frequently.\76\
---------------------------------------------------------------------------

    \74\ See PIRC.
    \75\ See FINRA Response Letter.
    \76\ Id.
---------------------------------------------------------------------------

    With respect to any account subject to the requirements of Exchange
Act Rule 17a-3(a)(17) to periodically update customer records, proposed
Supplementary Material .06(c) to Rule 4512 would require a member to
make reasonable efforts to obtain or, if previously obtained, to update
where appropriate the name of and contact information for a trusted
contact person consistent with the requirements in Rule 17a-
3(a)(17).\77\ One commenter requested clarification on how the update
requirement would apply to automated compliance processes or tech
platforms that permit a client to voluntarily change information at
their convenience.\78\ In response, FINRA states that the requirements
of Rule 17a-3(a)(17) apply to a wide range of account information and
would not be unique to trusted contact person information.\79\ For any
account subject to Rule 17a-3(a)(17), FINRA believes that any automated
compliance process or tech platform would need to comply with the
requirements of Rule 17a-3(a)(17).\80\
---------------------------------------------------------------------------

    \77\ The Commission notes that, while FINRA Rule 4512 would
impose on accounts subject to the requirements of Rule 17a-3(a)(17)
a requirement to update trusted contact information, Rule 17a-
3(a)(17) by its terms imposes no independent requirement to do so,
and Rule 4512 has no effect on a member's obligations under Rule
17a-3(a)(17).
    \78\ See SIFMA.
    \79\ See FINRA Response Letter.
    \80\ Id.
---------------------------------------------------------------------------

    Another commenter requested confirmation that the obligation to
obtain trusted contact person information for existing accounts in the
course of the member's routine and customary business would be
satisfied where the member updated the account within the 36-month
period in accordance with the requirements of Rule 17a-
3(a)(17)(i)(D).\81\ In response, FINRA states that, consistent with the
requirements of Rule 4512(b) discussed above, the requirement to update
the account information may be triggered earlier than the 36-month
period if the member updates the information for the account either in
the course of the member's routine and customary business or as
otherwise required by applicable laws or rules.\82\
---------------------------------------------------------------------------

    \81\ See FSR.
    \82\ See FINRA Response Letter.
---------------------------------------------------------------------------

2. Safe Harbor
    As set forth in the Proposal, Supplementary Material .01 to Rule
2165 states that members will be provided a safe harbor from FINRA
Rules 2010, 2150 and 11870 when members exercise discretion to place
temporary holds on disbursements of funds or securities from the
accounts of specified adults under the circumstances denoted in the
Rule. Rather than providing a safe harbor when members choose to place
temporary holds, three commenters supported requiring members to place
temporary holds where there is a reasonable belief of financial
exploitation.\83\ In response, FINRA states its belief that a member
can better protect its customers from financial exploitation if the
member can use its discretion in placing a temporary hold on a
disbursement of funds or securities from a customer's account.\84\
Accordingly, FINRA declined to make the suggested change.\85\
---------------------------------------------------------------------------

    \83\ See GSU, PIABA, and PIRC.
    \84\ See FINRA Response Letter.
    \85\ Id.
---------------------------------------------------------------------------

    One commenter requested that the safe harbor language be moved into
the body of the rule text and the protection be extended to registered
representatives of the member.\86\ In its Response Letter, FINRA states
that, because Supplementary Material is part of the rule, it would not
move the language as requested.\87\
---------------------------------------------------------------------------

    \86\ See NAIFA.
    \87\ See FINRA Response Letter.
---------------------------------------------------------------------------

    Two commenters requested that the Supplementary Material be revised
to explicitly state that the safe harbor applies to associated
persons.\88\ In response, and as discussed in Partial Amendment No. 1,
FINRA is proposing to incorporate associated persons into the rule
text, which is consistent with FINRA's original interpretation of the
scope of the safe harbor.\89\ FINRA states that, as amended, proposed
Supplementary Material .01 to Rule 2165 would explicitly provide that
members and their associated persons have a safe harbor from FINRA
Rules 2010, 2150 and 11870 when members exercise discretion in placing
temporary holds on disbursements of funds or securities from the
accounts of specified adults consistent with the requirements of Rule
2165.\90\
---------------------------------------------------------------------------

    \88\ See FSR and Wells Fargo.
    \89\ See FINRA Response Letter.
    \90\ Id.
---------------------------------------------------------------------------

    Another commenter suggested that the inclusion of Rules 2010 and
2150 in Supplementary Material .01 would create protections far beyond
the scope of what is necessary to encourage members to act on financial
exploitation.\91\ In response, FINRA states its belief that it is
appropriate to include Rules 2010 and 2150 in Supplementary Material
.01, as the rules may be implicated by a member's exercise of
discretion to place a temporary hold on a disbursement.\92\ This same
commenter also suggested that when a member exercises discretion and
chooses not to place a hold, then the member should not be granted a
safe harbor from duties that they would otherwise have under FINRA
rules.\93\ In response, and as noted above, FINRA states that the
proposed safe harbor does not apply to a decision not to place a hold;
rather, proposed Rule 2165 explicitly states that it provides members
with a safe harbor under FINRA rules when members exercise discretion
in placing a temporary hold on disbursements of funds or
securities.\94\
---------------------------------------------------------------------------

    \91\ See GSU.
    \92\ See FINRA Response Letter.
    \93\ See GSU.
    \94\ See FINRA Response Letter.
---------------------------------------------------------------------------

    Another commenter requested revising Rule 2165 to clarify that a
member's failure to place a hold on a customer account shall not be
deemed to be an abrogation of the member's duties under FINRA
rules.\95\ In its Response Letter, FINRA asserts that Supplementary
Material .01 clearly states that proposed Rule 2165 contains a safe
harbor, and that the Rule does not require placing a hold on a
disbursement.\96\
---------------------------------------------------------------------------

    \95\ See ICI.
    \96\ See FINRA Response Letter.
---------------------------------------------------------------------------

    Three commenters suggested that any associated person acting in
good faith should not be subject to complaints reportable on Form U4
(Uniform Application for Securities Industry Registration or Transfer),
and that the safe harbor should be extended to include FINRA Rule 4530
(Reporting Requirements).\97\ In its Response Letter, FINRA states that
the proposed safe harbor from FINRA rules would not extend to
complaints about an associated person that are reportable on Form
U4.\98\ However, FINRA notes that an associated person may respond to
any such complaints on Form U4, including with an explanation of
actions taken pursuant to proposed Rule 2165.\99\ FINRA further states
that the proposed safe harbor from FINRA rules would also not extend to
reporting required pursuant to Rule 4530, although FINRA would consider
whether a member or associated person had acted consistent with the
proposed rule when FINRA assesses reported information about a hold on
a disbursement.\100\
---------------------------------------------------------------------------

    \97\ See BDA, Janney, and SIFMA.
    \98\ See FINRA Response Letter.
    \99\ Id.
    \100\ Id.
---------------------------------------------------------------------------

    Lastly, a commenter stated that members may be subject to FINRA

sanctions (outside of Rules 2010, 2150 and 11870 violations) and
private claims, and requested that FINRA extend the safe harbor to
cover FINRA sanctions and private claims for members' reasonable
determinations regarding whether or not to place a temporary hold on a
disbursement.\101\ Another commenter suggested that the safe harbor be
extended to cover protection against liability for actions taken in
connection with notifying the appropriate state authorities of
financial exploitation.\102\ In response, FINRA states that proposed
Rule 2165 is designed to provide regulatory relief to members by
providing a safe harbor from FINRA rules for a determination to place a
temporary hold.\103\ Nevertheless, some states may separately provide
immunity to members under state law.\104\
---------------------------------------------------------------------------

    \101\ See CAI.
    \102\ See NAIFA.
    \103\ See FINRA Response Letter.
    \104\ Id.
---------------------------------------------------------------------------

3. Transactions
    Six commenters supported extending the scope of proposed Rule 2165
to apply to transactions.\105\ In its Response Letter, FINRA states
that, although proposed Rule 2165 does not apply to transactions, FINRA
may consider extending the safe harbor to transactions in securities in
future rulemaking.\106\
---------------------------------------------------------------------------

    \105\ See FSI, IRI, Janney, Reuters, SIFMA and Wells Fargo.
    \106\ See FINRA Response Letter.
---------------------------------------------------------------------------

4. Diminished Capacity
    Two commenters suggested extending the safe harbor beyond financial
exploitation to address a customer's diminished capacity.\107\ In its
Response letter, FINRA recognizes the challenges members face in
addressing diminished capacity and that this is an important issue for
further consideration, and that it can make seniors especially
vulnerable to financial exploitation.\108\ FINRA states that a member
could contact a trusted contact person if it suspects that the customer
may be suffering from Alzheimer's disease, dementia or other forms of
diminished capacity.\109\ FINRA further believes that a person with
diminished capacity would generally qualify as a ``specified adult'' as
defined by proposed Rule 2165(a)(1)(B).\110\
---------------------------------------------------------------------------

    \107\ See Lincoln and SIFMA.
    \108\ See FINRA Response Letter.
    \109\ Id.
    \110\ Id.
---------------------------------------------------------------------------

5. Specified Adults
    Proposed Rule 2165 would define ``specified adult'' as: (A) A
natural person age 65 and older; or (B) a natural person age 18 and
older who the member reasonably believes has a mental or physical
impairment that renders the individual unable to protect his or her own
interests. With respect to persons younger than age 65, two commenters
suggested revising the definition to cover other vulnerable persons
(e.g., persons who would be deemed vulnerable under state
statute).\111\ In response, FINRA states its belief that the suggested
change would present operational challenges for members, as the
customers covered by the definition would vary by jurisdiction.\112\
Furthermore, FINRA recognizes that customers who do not have a physical
or mental impairment may also be vulnerable; however, proposed Rule
2165 is intended to cover those customers most susceptible to financial
exploitation.\113\ As such, FINRA declined to make the suggested change
at this time.\114\
---------------------------------------------------------------------------

    \111\ See NASAA and PIRC.
    \112\ See FINRA Response Letter.
    \113\ Id.
    \114\ Id.
---------------------------------------------------------------------------

    Another commenter suggested revising proposed Supplementary
Material .03 to Rule 2165 to provide that belief of impairment shall
not create an assumption or implication that a member or its associated
persons are qualified to make, or responsible for making,
determinations about impairment.\115\ As stated in its Response Letter,
FINRA declined to revise the rule text as suggested because FINRA does
not intend proposed Rule 2165 to create an assumption or implication
that a member or its associated persons are qualified to make
impairment determinations beyond the limited purposes of the proposed
rule.\116\ FINRA states that the ``reasonable belief'' standard
required by proposed Rule 2165 for a member to place a temporary hold
imposes no such requirement.\117\
---------------------------------------------------------------------------

    \115\ See NAIFA.
    \116\ See FINRA Response Letter.
    \117\ Id.
---------------------------------------------------------------------------

6. Account
    As noted above, proposed Rule 2165 would define ``account'' to mean
any account of a member for which a specified adult has the authority
to transact business. One commenter suggested that the definition of
``account'' may be overly broad, and suggested clarifying that
transactions in securities, such as variable insurance products, sold
by a broker-dealer, but not custodied in a brokerage account, are not
subject to proposed Rule 2165.\118\ In response, FINRA states that
proposed Rule 2165 applies to disbursements of funds or securities out
of a customer account, and does not apply to transactions in
securities.\119\
---------------------------------------------------------------------------

    \118\ See ACLI.
    \119\ See FINRA Response Letter.
---------------------------------------------------------------------------

7. Disbursements
    Two commenters expressed concern that a temporary hold pursuant to
proposed Rule 2165 may not comply with the requirements of Section
22(e) of the Investment Company Act of 1940 (``1940 Act'').\120\ FINRA
states in response that most mutual fund customer accounts are serviced
and record-kept by intermediaries.\121\ According to FINRA, in the
small proportion of circumstances where mutual fund customers purchase
shares directly from the mutual fund, the customer's account may be
maintained by a mutual fund's principal underwriter.\122\ Based on
discussions with SEC staff, FINRA does not believe that a broker-
dealer's delay of a disbursement of mutual fund redemption proceeds to
its customers in reliance on proposed Rule 2165 and based on a
reasonable belief of financial exploitation of the customer would be
imputed to the mutual fund, including where the broker-dealer is the
fund's principal underwriter.\123\ However, this conclusion is limited
to situations where the mutual fund does not have a role in the
disbursement of redemption proceeds from the customer's account held by
the broker-dealer, including any role in the decision to delay the
disbursement of funds in reliance on proposed Rule 2165.\124\
---------------------------------------------------------------------------

    \120\ See CAI and Lincoln.
    \121\ See FINRA Response Letter.
    \122\ Id.
    \123\ Id.
    \124\ Id.
---------------------------------------------------------------------------

    Another commenter requested clarification on how ACATS transfers
would be treated under proposed Rule 2165.\125\ For purposes of
proposed Rule 2165, FINRA responds that it would consider disbursements
to include ACATS transfers but, as with any temporary hold, a member
would need to have a reasonable belief of financial exploitation in
order to place a temporary hold on the processing of an ACATS transfer
request pursuant to the Rule.\126\ FINRA recognizes that, depending on
the facts and circumstances, placing a temporary hold on the processing
of an ACATS transfer request could also lead the member to place a
temporary hold on all assets in

an account, for the same reasons.\127\ However, according to FINRA, if
a temporary hold is placed on the processing of an ACATS transfer
request, the member must permit disbursements from the account where
there is not a reasonable belief of financial exploitation regarding
such disbursements.\128\ FINRA also reminds members of the application
of FINRA Rule 2140 (Interfering with the Transfer of Customer Accounts
in the Context of Employment Disputes) to the extent that there is not
a reasonable belief of financial exploitation.\129\
---------------------------------------------------------------------------

    \125\ See SIFMA.
    \126\ See FINRA Response Letter.
    \127\ Id.
    \128\ Id.
    \129\ Id.
---------------------------------------------------------------------------

    Another commenter requested clarification on where funds from a
disbursement subject to a temporary hold should be maintained by a
member.\130\ FINRA responds that, while the temporary hold on a
disbursement is in effect, the funds or securities would remain in a
customer's account and would not be released.\131\
---------------------------------------------------------------------------

    \130\ See ACLI.
    \131\ See FINRA Response Letter.
---------------------------------------------------------------------------

8. Persons Permitted To Place Temporary Holds
    Proposed Rule 2165 would provide that a member may place the hold
on a disbursement, provided that the member's written supervisory
procedures identify the title of each person authorized to place,
terminate or extend a hold on behalf of the member and that each such
person be serving in a supervisory, compliance or legal capacity for
the member. One commenter suggested expanding the categories of persons
authorized to place holds on behalf of a member to include persons who
have been designated by the member to review cases involving specified
adults as part of the member's escalation process.\132\ In its Response
Letter, FINRA states that, while the benefits of preventing financial
exploitation are significant to both the member and customer, placing a
temporary hold on a disbursement is a serious action on the part of a
member and may lead to difficult but necessary conversations with
customers that could impact the member-customer relationship.\133\
FINRA believes that the current form of proposed Rule 2165 promotes
administrative clarity, that it is reasonable to limit authority for
placing holds on disbursements to a select group of individuals
associated with the member, that persons serving in a supervisory,
compliance or legal capacity are well positioned to make these
determinations on behalf of the member, and that such a limitation is
not a substantial burden to members that wish to rely on the rule's
safe harbor provision.\134\ Accordingly, FINRA declined to make the
suggested revision.\135\
---------------------------------------------------------------------------

    \132\ See SIFMA.
    \133\ See FINRA Response Letter.
    \134\ Id.
    \135\ Id.
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9. Period of Temporary Hold
    As set forth in the Proposal, the temporary hold authorized by
proposed Rule 2165 would expire not later than 15 business days for any
initial period and up to 10 business days in any subsequent period
after the date that the member first placed the temporary hold on the
disbursement of funds or securities, unless sooner terminated or
extended by an order of a state regulator or agency or court of
competent jurisdiction. Two commenters suggested that the time periods
may not be adequate to give state regulators and agencies or courts
time to take action on a matter.\136\ Another commenter suggested that
regulatory approval be required prior to extending a temporary hold
beyond the initial 15 business day period.\137\ FINRA responds that, in
proposing the time periods, it has tried to strike a reasonable balance
in giving members adequate time to investigate and contact the relevant
parties, seeking input from a state regulator or agency or a court
order if needed, but also not permitting an open-ended or overly long
hold period in recognition of the seriousness of placing a temporary
hold on a disbursement.\138\
---------------------------------------------------------------------------

    \136\ See IRI and PIRC.
    \137\ See NASAA.
    \138\ See FINRA Response Letter.
---------------------------------------------------------------------------

    Another commenter stated that the rule text, as set forth in the
Proposal, could be read to require the termination or extension of the
temporary hold by the state regulator or agency of competent
jurisdiction or a court of competent jurisdiction prior to the initial
hold being extended for an additional 10 business day period.\139\ In
response, FINRA states that it did not intend to impose any such
limitation.\140\ As discussed in the Partial Amendment No. 1, FINRA
states that it is proposing to revise Rule 2165(b)(2) and (3) to
provide that a member may place a temporary hold for up to 25 business
days when the Rule's requirements are met, unless the temporary hold is
``otherwise'' terminated or extended by a state regulator or agency of
competent jurisdiction or a court of competent jurisdiction.\141\
According to FINRA, this proposed change is intended to recognize that
a state regulator or agency or a court may terminate or extend a hold
on a disbursement at any time during the time period provided by
proposed Rule 2165(b)(2) and (3).\142\
---------------------------------------------------------------------------

    \139\ See SIFMA.
    \140\ See FINRA Response Letter.
    \141\ Id.
    \142\ Id.
---------------------------------------------------------------------------

    One commenter suggested that Rule 2165 should explicitly provide
that a member must terminate a temporary hold as soon as the member's
internal review of the facts and circumstances that were the basis for
the hold does not support a reasonable belief that financial
exploitation is occurring or is attempted.\143\ In response, FINRA
states that it declines to revise the rule text as suggested, but that
it would expect a member to lift a temporary hold when it no longer has
a reasonable belief of financial exploitation (e.g., when subsequent
events indicate that the threat of financial exploitation no longer
exists).\144\
---------------------------------------------------------------------------

    \143\ See ICI.
    \144\ See FINRA Response Letter.
---------------------------------------------------------------------------

10. Notifying All Parties Authorized To Transact Business
    Under proposed Rule 2165(b)(1)(B)(i), a member is required to
notify all parties authorized to transact business on an account of the
temporary hold and the reason for the temporary hold when the member
places a temporary hold on a disbursement. Two commenters expressed
concern that the rule text does not contemplate a party being
unavailable, and that notifying all parties could lead to increased
risk for the customer where a party is the suspected perpetrator of the
financial exploitation.\145\ The commenters suggested providing an
exception from the notification requirement where a party is
unavailable or where the member reasonably suspects that a party has
engaged, is engaged, or will engage in the financial exploitation of
the Specified Adult.\146\ In response, FINRA states its belief that,
although a member will need to exercise discretion in forming a
reasonable belief that a party authorized to transact business on an
account is engaged in the financial exploitation, FINRA also believes
it is appropriate to provide an exception from contacting a party
authorized to transact business on an account that is comparable to the
exception provided for notifying a customer's trusted contact
person.\147\ As stated in Partial Amendment No. 1, FINRA is proposing

to amend Rule 2165(b)(1)(B)(i) to provide that a member is required to
notify all parties authorized to transact business on an account,
unless a party is unavailable or the member reasonably believes that
the party has engaged, is engaged, or will engage in the financial
exploitation of the Specified Adult.\148\
---------------------------------------------------------------------------

    \145\ See LPL and SIFMA.
    \146\ Id.
    \147\ See FINRA Response Letter.
    \148\ Id.
---------------------------------------------------------------------------

    Another commenter suggested that requiring notification of all
parties authorized to transact business on an account could
inadvertently interfere with the ability to use the safe harbor in Rule
2165 if a member has trouble locating one or more authorized
parties.\149\ In its Response Letter, FINRA states it does not believe
that the notification requirement should impact a member's decision to
place a hold as it is a post-hold obligation.\150\
---------------------------------------------------------------------------

    \149\ See IRI.
    \150\ See FINRA Response Letter.
---------------------------------------------------------------------------

11. Notifying Immediate Family Member
    Due to the privacy and operational challenges noted by commenters
in response to the proposal in Regulatory Notice 15-37, the Proposal
did not require notifying an immediate family member when a temporary
hold is placed. Three commenters supported removing the requirement to
contact an immediate family member.\151\ One commenter agreed that
requiring a member to contact an immediate family member may be overly
restrictive and result in privacy issues, but suggested that the safe
harbor be expanded to cover instances in which a member uses its
discretion to contact a person reasonably believed to be connected with
the account owner when the trusted contact person is unavailable.\152\
In its Response Letter, FINRA states that expanding proposed Rule 2165
to authorize members to contact any person reasonably believed to be
connected with an account owner may create the same privacy and
operational challenges raised by commenters to Regulatory Notice 15-
37.\153\ However, FINRA states that proposed Rule 2165 would not
preclude a member from contacting an immediate family member or any
other person provided that the member has customer consent to do
so.\154\
---------------------------------------------------------------------------

    \151\ See GSU, IRI and NASAA.
    \152\ See Wells Fargo.
    \153\ See FINRA Response Letter.
    \154\ Id.
---------------------------------------------------------------------------

12. Notification Period
    Proposed Rule 2165 would require the member to provide notification
of the temporary hold and the reason for the hold to all parties
authorized to transact business on the account and the trusted contact
person, if available, no later than two business days after placing the
hold. Three commenters suggested extending the time period for
notification beyond two business days.\155\ FINRA declined to extend
the time period for notification beyond two business days, given its
belief in the need for urgency in dealing with financial exploitation
and to remain consistent with the NASAA model state act.\156\
---------------------------------------------------------------------------

    \155\ See CAI, IRI and SIFMA.
    \156\ See FINRA Response Letter.
---------------------------------------------------------------------------

13. Privacy Considerations
    Three commenters requested clarification on what information may be
shared pursuant to the Proposal without violating Regulation S-P.\157\
In response, FINRA states that disclosures to a trusted contact person
pursuant to proposed Rules 2165 and 4512(a)(1)(F) would be consistent
with Regulation S-P, because such disclosures would be made with
customers' consent or authorization,\158\ to protect against fraud or
unauthorized transactions, or to comply with federal, state, or local
laws, rules and other applicable legal requirements, including the
requirements of Rule 2165.\159\
---------------------------------------------------------------------------

    \157\ See BDA, CAI and FSR.
    \158\ FINRA notes that, under the Proposal, members would be
required to disclose to customers the purposes for obtaining the
trusted contact information, including the possible disclosure of
account information to a trusted contact in specified circumstances,
and customers would authorize or consent to such disclosure by
voluntarily providing the trusted contact information. See FINRA
Response Letter.
    \159\ See FINRA Response Letter. The Commission staff confirmed
the accuracy of this interpretation during discussions with FINRA.
---------------------------------------------------------------------------

14. Policies and Procedures
    Proposed Rule 2165 would require a member that anticipates using a
temporary hold in appropriate circumstances to establish and maintain
written supervisory procedures reasonably designed to achieve
compliance with the Rule, including, but not limited to, procedures on
the identification, escalation and reporting of matters related to
financial exploitation of specified adults. One commenter suggested
requiring all members to establish and maintain written supervisory
procedures reasonably designed to achieve compliance with the
Rule.\160\ In its Response Letter, FINRA states that, because placing a
temporary hold is discretionary, not mandatory, FINRA declines to make
the suggested change.\161\
---------------------------------------------------------------------------

    \160\ See PIRC.
    \161\ See FINRA Response Letter.
---------------------------------------------------------------------------

    Another commenter recommended requiring the written supervisory
procedures to include provisions designed to ensure that the member
lifts a temporary hold as soon as practicable after the member conducts
an internal review and finds that the hold is not warranted.\162\ As
noted above, FINRA expects that a member would lift a temporary hold
when it no longer has a reasonable belief of financial
exploitation.\163\ This same commenter also suggested that it is
unclear whether the member can freeze all owners' access to the
account, and recommended that FINRA require a member's written
supervisory procedures to include provisions regarding the impact of a
temporary hold on those joint account owners who are not believed to be
the subject of financial exploitation.\164\ In response, FINRA states
that Proposed Rule 2165 would permit placing a temporary hold only
where there is a reasonable belief of financial exploitation and only
with regard to a specific disbursement(s).\165\ Accordingly, FINRA
declined to make the suggested change.\166\
---------------------------------------------------------------------------

    \162\ See ICI.
    \163\ See FINRA Response Letter.
    \164\ See ICI.
    \165\ See FINRA Response Letter.
    \166\ Id.
---------------------------------------------------------------------------

15. Training
    The Proposal would require members to develop and document training
policies or programs reasonably designed to ensure that associated
persons comply with the requirements of Rule 2165. One commenter
supported applying the training requirement to associated persons, but
suggested that FINRA should oversee training, including incorporating
into its FINRA Rule 1250 (Continuing Education Requirements) training a
module on the requirements of the Proposal and recognizing financial
exploitation of vulnerable adults.\167\ In its Response Letter, FINRA
states that the Proposal provides members with reasonable discretion in
determining how best to structure their training policies or
programs.\168\ FINRA states that, while it has developed material for
the Continuing Education Regulatory Element Program that addresses the
financial exploitation of senior investors, members are responsible for
developing and documenting their training policies and programs.\169\
FINRA states that it will consider whether to develop additional

continuing education content specifically addressing financial
exploitation of seniors and providing additional guidance to members,
as appropriate.\170\
---------------------------------------------------------------------------

    \167\ See GSU.
    \168\ See FINRA Response Letter.
    \169\ Id.
    \170\ Id.
---------------------------------------------------------------------------

16. Reporting
    One commenter supported not requiring as part of proposed Rule 2165
that members report financial exploitation to local adult protective
services and law enforcement, asserting that such a permissive approach
would allow firms and advisors to undertake a reasonable inquiry and to
decide whether or not to freeze an account without considering their
own potential liability.\171\ In contrast, several other commenters
recommended revising proposed Rule 2165 to require members to report
financial exploitation to state and local authorities, such as adult
protective services and law enforcement, or FINRA.\172\ One such
commenter also supported requiring members to provide any account
information requested by state and local authorities to conduct their
investigations.\173\ Another suggested clarifying in Supplementary
Material to Rule 2165 how members should coordinate with a state
regulator or agency to confirm or validate suspicions regarding
financial exploitation.\174\
---------------------------------------------------------------------------

    \171\ See FSI.
    \172\ See Investor Advocate, NAIFA, NASAA and PIABA.
    \173\ See Investor Advocate.
    \174\ See FSR.
---------------------------------------------------------------------------

    In its Response Letter, FINRA states that, while proposed Rule 2165
does not require members to report a reasonable belief of financial
exploitation to a state or local authority, some states mandate such
reporting by financial institutions, including broker-dealers.\175\
Given the varying and evolving reporting requirements under state law,
FINRA believes that states are well positioned to determine whether a
broker-dealer or any other entity has satisfied its reporting
requirements under state law.\176\ FINRA states that it would expect
members to comply with all applicable state requirements, including
reporting requirements, and FINRA staff may request records related to
state reporting as part of the examination process.\177\ Even where a
state may not require such reporting, FINRA believes that members may
find it beneficial to contact relevant state agencies, such as state
securities regulators or state or local adult protective services, to
assist in resolving matters involving possible financial abuse.\178\
---------------------------------------------------------------------------

    \175\ See FINRA Response Letter.
    \176\ Id.
    \177\ Id.
    \178\ Id.
---------------------------------------------------------------------------

17. Implementation Period
    If the Commission approves the Proposal, some commenters requested
that members have from 12 to 18 months to implement the
requirements.\179\ As a general matter, these commenters noted that
additional time is needed to make all of the necessary adjustments to
their internal systems, including updates needed to incorporate the
trusted contact person-related requirements. As discussed in the
Partial Amendment No. 1, FINRA states it has determined to extend the
implementation period before effectiveness from ``no later than 180
days following Commission approval'' to 12 months from Commission
approval.\180\ FINRA intends this extended period of implementation to
provide members more time to commit the necessary resources to
implement the Proposal.\181\ FINRA believes this change is an
appropriate balance of the commenters' concerns and the strong desire
to provide tools to members to address possible financial exploitation
under the Proposal as soon as practicable.\182\
---------------------------------------------------------------------------

    \179\ See BDA, Edward Jones, FSR, LPL, Reuters, SIFMA and Wells
Fargo.
    \180\ See FINRA Response Letter.
    \181\ Id.
    \182\ Id.
---------------------------------------------------------------------------

C. Opposition to Proposed Rule 2165

    One commenter supported the proposed amendments to Rule 4512
regarding a trusted contact person, but opposed the proposed adoption
of Rule 2165 that would permit temporary holds on disbursements where
there is a reasonable belief of financial exploitation.\183\ This
commenter asserted, among other things, that the ``reasonable belief''
standard for placing the temporary hold was ``too low relative to the
potential harm to a customer from not being able to withdraw funds or
securities,'' and that, absent a clearer standard, ``Rule 2165 creates
an incentive to place a hold on an account as the default response to
concerns about a specified adult.'' \184\ In its Response Letter, FINRA
states that it believes the Proposal is needed to provide members with
a ``defined'' way to respond to situations where there is a reasonable
belief of financial exploitation of seniors and other vulnerable
adults, including the ability to share customer information with a
trusted contact person.\185\ Furthermore, FINRA believes that the
Proposal would promote investor protection by providing members with a
safe harbor from FINRA rules that might otherwise discourage them from
exercising discretion to protect customers through placing a temporary
hold on disbursements of funds or securities.\186\
---------------------------------------------------------------------------

    \183\ See Cornell.
    \184\ Id.
    \185\ See FINRA Response Letter.
    \186\ Id.
---------------------------------------------------------------------------

IV. Solicitation of Comments on Partial Amendment No. 1

    Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change, as amended by Partial Amendment No. 1, is consistent with the
Act. Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-FINRA-2016-039 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2016-039. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of FINRA. All
comments received will be posted without change; the Commission does
not edit personal

identifying information from submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-FINRA-2016-039 and should be submitted
on or before March 2, 2017.

V. Discussion and Commission Findings

    The Commission has carefully considered the Proposal, the comments
received, FINRA's response to the comments, and Partial Amendment No.
1. Based on its review of the record, the Commission finds that the
Proposal, as modified by Partial Amendment No. 1, is consistent with
the requirements of the Exchange Act and the rules and regulations
thereunder applicable to a national securities association.\187\ In
particular, the Commission finds that the Proposal, as modified by
Partial Amendment No. 1, is consistent with Section 15A(b)(6) of the
Exchange Act,\188\ which requires, among other things, that FINRA's
rules be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, and, in
general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \187\ In approving the Proposal, as modified by Partial
Amendment No. 1, the Commission has also considered its impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
    \188\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

    As discussed above, the Proposal, as modified by Partial Amendment
No. 1, would: (1) Require members to make reasonable efforts to obtain
the name of and contact information for a trusted contact person for a
customer's account; and (2) permit members to place temporary holds on
disbursements of funds or securities from the accounts of specified
customers, where there is a reasonable belief that these customers have
been, are being, or will be subject to financial exploitation.
    The Commission has considered the twenty-one (21) comment letters
received on the Proposal,\189\ along with FINRA's Response Letter, and
Partial Amendment No. 1.\190\ The Commission acknowledges the
supportive commenters' positions, such that adoption of the Proposal
would better enable FINRA members ``to protect seniors and other
vulnerable adults from financial exploitation,'' \191\ that the
Proposal was ``well-conceived to help member firms protect seniors,''
\192\ and that it would provide additional guidance to members, create
uniform practices, and make customers more willing to provide trusted
contact information.\193\
---------------------------------------------------------------------------

    \189\ See supra note 5.
    \190\ See supra note 7.
    \191\ See ICI.
    \192\ See Janney.
    \193\ See FSI.
---------------------------------------------------------------------------

    The Commission also acknowledges commenters' concerns and
recommended modifications to the Proposal. However, it also notes that
FINRA's response to comments addresses many of these concerns, and
offers additional clarifications regarding FINRA's expectations
regarding the operation of the Proposal. For example, FINRA clarified
that the notification requirement is a post-hold obligation, and that
the proposed safe harbor does not apply to a decision not to place a
hold. FINRA also addresses a concern of several commenters through its
proposed partial amendment, which makes explicit in the rule text that
associated persons are covered by the rule's safe harbor, a position
FINRA indicated is consistent with its original interpretation of the
scope of the safe harbor. Throughout its response to comments, FINRA
has emphasized its attempts to balance members' operational
practicalities with the serious investor protection concerns raised
both by the specter of financial exploitation and the seriousness of
placing a temporary hold on a disbursement. Moreover, FINRA has
addressed commenters' questions about the intersection of the Proposal
with both Section 22(e) of the 1940 Act, and with Regulation S-P, based
on its discussions with Commission staff.
    Taking into consideration the comments and FINRA's responses, the
Commission finds that the Proposal is consistent with the Exchange Act.
Specifically, the Commission believes that the Proposal will protect
investors and the public interest by, among other things, providing
FINRA members with means by which they can respond to situations where
there is a reasonable belief of financial exploitation of seniors and
other vulnerable adults. The Commission additionally believes that the
Proposal will promote investor protection by providing FINRA members
with a safe harbor from the purported violation of certain FINRA rules,
without which such members might otherwise be discouraged from placing
a temporary hold on disbursements of funds or securities where there is
a reasonable belief of financial exploitation.
    The Commission believes that FINRA's responses, as discussed in
more detail above, appropriately addressed commenters' concerns and
adequately explained FINRA's reasons for modifying or declining to
modify its Proposal. Accordingly, the Commission believes that the
approach proposed by FINRA is appropriate and designed to protect
investors and the public interest, consistent with Section 15A(b)(6) of
the Exchange Act and the rules and regulations thereunder.

VI. Conclusion

    It is therefore ordered pursuant to Section 19(b)(2) \194\ of the
Exchange Act that the proposed rule change (SR-FINRA-2016-039), as
modified by Partial Amendment No. 1, be and hereby is approved on an
accelerated basis.
---------------------------------------------------------------------------

    \194\ Id.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\195\
---------------------------------------------------------------------------

    \195\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-02645 Filed 2-8-17; 8:45 am]
 BILLING CODE 8011-01-P