FINRA filed with the SEC a proposed rule "to create a uniform, national standard to govern registered persons holding positions of trust."

As previously covered, the rule would restrict certain associated persons from acting as beneficiaries, or as executors or trustees, on behalf of or for a customer.

According to FINRA, Rule 3241 ("Registered Person Being Named a Customer's Beneficiary or Holding a Position of Trust for a Customer") would obligate a registered person to decline:

  • being named a beneficiary of a customer's estate (which includes the cash and securities, real estate, insurance, trusts, annuities, business interests and other assets the customer owns or has an interest in at the time of death), or receiving a bequest from a customer's estate, unless it provides written notice when learning of such status or capacity, and receives written approval from the member firm prior to assuming such status or capacity; and
  • being named an executor, trustee or holder of a power of attorney for a customer, or other similar position for or on behalf of a customer, unless it, when learning of such status (i) provides written notice, (ii) receives written approval from the member firm prior to acting in such capacity "or receiv[es] any fees, assets or other benefits in relation to acting in such capacity," and (iii) does not derive any financial gains from the position "other than from fees or other charges that are reasonable and customary for acting in such capacity."

The proposed rule will not (i) apply where the customer is a member of the registered person's immediate family or (ii) affect the applicability of other rules, such as FINRA Rule 2150 ("Improper Use of Customers' Securities or Funds; Prohibition against Guarantees and Sharing in Accounts").

Under the proposal, the employing firm will be required to "perform a reasonable assessment of the risks created" and "make a reasonable determination" of whether to provide the relevant approval and, if approval is granted subject to conditions, reasonably supervise compliance with such conditions.

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