Enforcement Priorities and Dealing With An Aging Investor Base - Bressler and NJSBA Securities Law Program Summary

Securities Law Alert

November 14, 2017

Richard C. Szuch

Richard C. Szuch


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Financial Institutions
On November 7, 2017, Bressler, Amery & Ross co-hosted a meeting with the New Jersey State Bar Association Securities Law Special Committee in its Florham Park, New Jersey office.  The meeting featured two panel discussions, one regarding recent regulatory and enforcement priorities and one related to senior investors.  Speaking were Christopher W. Gerold, Chief of the New Jersey Bureau of Securities; Joseph J. Sheirer, Director of FINRA District Office 9B located in Woodbridge, New Jersey; and Thomas M. Mierswa, Jr., Executive Director and Head of Branch Advisory Group for Morgan Stanley. 

Bressler, Amery & Ross Principal Frank J. Cuccio moderated the first session, which addressed the New Jersey regulators’ enforcement priorities. Messrs. Gerold and Sheirer explained their respective organizations’ focus on “high risk” or recidivist brokers, product suitability, sector concentration, and the short-term trading of investments intended to be held long-term.  They also voiced concerns about advisors’ communications via social media, such as LinkedIn messaging, based on difficulties monitoring this type of communication and retaining proper records about them.

Bressler, Amery & Ross Principal Richard C. Szuch led the second session, which concerned the industry’s heightened focus on protecting senior and vulnerable investors.  Mr. Mierswa, along with Messrs. Gerold and Sheirer, discussed existing and pending federal and state laws and FINRA rules addressing these investors. Amended FINRA Rule 4512 requires firms to make reasonable efforts to obtain the name and contact information of a trusted contact person. New FINRA Rule 2165 permits firms to place a 15 day temporary hold on suspicious disbursements from the accounts of “specified adults.”  These rules take effect in February 2018.  

Potentially vulnerable investors include mentally and physically impaired clients as well as elderly or ill investors who cannot protect their own interests. All agreed that age is just one factor to consider in determining the appropriateness of an investment or investment strategy.  Each also agreed that older investors are not necessarily conservative, and that they may have to accept some risk to meet long term investment goals for retirement.    

Recognizing the heightened potential vulnerability of senior investors and the changing legal landscape, the panelists recommended that firms be diligent in developing written supervisory procedures, adequate systems, and employee training to ensure compliance with FINRA Rules 4512 and 2165. For a more detailed discussion of these rules, See Patricia Solfaro, Protecting Your Senior Clients: Compliance in Advance of the February 5 FINRA Deadline . . . and Beyond (Nov. 7, 2017), available at  http://www.bressler.com/protecting-your-senior-clients-compliance-in-advance-of-the-february-5-finra-deadline-and-beyond