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Compliance Concepts

The Graying of America – Impact on FINRA Disciplinary Actions

January 22, 2019

by Howard Haykin


Read today’s Financialish case study about exercising discretion without written authorization (80 Years of Experience, Yet No Leniency from FINRA in Meting Out Sanctions), and you’ll learn how a phone call to FINRA’s Senior Helpline prompted the regulator to launch an investigation into whether a Morgan Stanley broker had wrongfully traded in the account of an elderly investor.


That call was placed by an individual who said the broker had placed trades in an account belonging to his mother without first speaking to his mother. As it turned out, the mother (and other MS customers) apparently gave the broker verbal authority to use discretion in their accounts. However, Morgan Stanley never gave this broker its permission to make trades on a discretionary basis, meaning that he was clearly in the wrong.


THE GRAYING OF AMERICA.    Okay, since trading on verbal authority is ‘same-old-same-old’ - what’s new or different about this case? How about … 'alerts to FINRA’s Senior Helpline', a term that typically pops up only in FINRA Investor Alerts. But that’s likely to change.


As elderly investors live longer, their caregivers – in particular, their ‘baby boomer’ children – are going to be more involved in managing their parents’ financial assets. And they’ll pounce (or should pounce) whenever anything seems ‘out of the ordinary - which is more likely to happen because ... 


  • Caregivers aren't aware of verbal arrangements between a broker and his or her elderly investors.
  • Caregivers are not fully aware of the long-term, trusted relationship that many brokers have had with their elderly customers.
  • An elderly investor (with short-term memory lapses) may not recall having given authorization or approval to a broker, especially when questioned about specific transactions.


It all adds up to elevated risks for firms and their brokers. Which makes it incumbent on multiple players in a broker-dealer to be on guard for instances of violative conduct – real or perceived.



The above case was reported in FINRA Disciplinary Actions for January 2019. For details, go to ... FINRA Disciplinary Actions Online, and refer to FINRA Case #2017055321601.