FINRA Adopts Rule to Limit Brokers from Being Named Customers’ Beneficiary
The Financial Industry Regulatory Authority has adopted a new rule to limit potential conflicts of interest when brokers are named a customer’s beneficiary.
The Financial Industry Regulatory Authority has adopted a new rule to limit potential conflicts of interest when brokers are named a customer’s beneficiary, executor or trustee, or hold a power of attorney or similar position for or on behalf of their customer.
The new FINRA Rule 3241 requires broker-dealers to review and approve or disapprove a broker being named a beneficiary or holding positions of trusts for customers. The rule does not apply to immediate family members and becomes effective February 15, 2021.
Many, but not all, member firms already address these potential conflicts by prohibiting or imposing limitations when there is not a familial relationship.
FINRA said that it has observed situations where registered representatives tried to circumvent firm policies, such as resigning as a customer’s registered representative, transferring the customer to another registered representative, or having the customer name the registered representative’s spouse or child as the customer’s beneficiary.
FINRA claims that Rule 3241 creates a uniform, national standard to govern registered persons holding positions of trust and “better protects investors and provides consistency across member firms’ policies and procedures.”
