In a combined effort to provide additional protection for investors, FINRA and the North American Securities Administrators Association (NASAA), of which the North Dakota Securities Department is a member, have announced a new campaign urging investors to provide their financial firms with a trusted contact. The U.S. Securities and Exchange Commission’s Office of Investor Education and Advocacy (SEC OIEA) is also collaborating on this initiative.
What is a Trusted Contact?
A trusted contact is an individual authorized by an investor to be contacted by their financial firm in limited circumstances. These circumstances would include concerns about activity in the investor’s account or if the firm has been unable to reach the investor after numerous attempts. A trusted contact may be a family member, attorney, accountant or another reliable third party; investors may establish more than one trusted contact and may add or change a trusted contact at any time.
Rules for the Investment Industry
FINRA Rule 4512 requires FINRA member firms to ask an investor for the name and contact information of a trusted contact person when opening a non-institutional customer’s account or when updating account information for a non-institutional account. A trusted contact can help firms connect with investors to confirm current contact information, health status or the identity of any legal guardian, executor, trustee or holder of a power of attorney.
“Investor protection is at the core of FINRA's mission and this collaborative effort with NASAA and the SEC OIEA reflects our shared commitment to better inform and protect investors,” said FINRA President and Chief Executive Officer Robert Cook. “All investors can benefit from adding a trusted contact to their account—having one or more trusted contacts provides another layer of security on the account and puts the financial firm in a better position to help keep the account safe.”
Financial firms are encouraged to share campaign resources with investors, and investors are encouraged to review the materials, ask questions and contact their firm to name a trusted contact. All of the campaign’s resources can be found on www.finra.org/trustedcontact.
“At NASAA we are pleased to work collaboratively with our counterparts at FINRA and with SEC staff to advance investor protection measures, especially steps we can take to better protect senior investors,” said NASAA President and Maryland Securities Commissioner Melanie Senter Lubin. “The addition of a trusted contact will provide an additional layer of security and protection to all investors.”
Resources for Investors
This webpage provides details on how a trusted contact can help investors when the firm cannot reach them—whether because of travel, a natural disaster, a health issue or when the firm is concerned about potential fraud.
This infographic reminds investors that financial firms may reach out to trusted contacts only in limited circumstances, underscoring that a trusted contact:
- Cannot make trades in the investor’s account.
- Cannot make decisions about the investor’s account; and
- Does not become a power of attorney, legal guardian, trustee or executor by virtue of being identified as a trusted contact.
This video also explains what a trusted contact person is and why it’s important that investors provide one to their financial firm.
Information about Securities Regulators
NASAA:
Formed in 1919, NASAA is a nonprofit association of state, provincial and territorial securities regulators in the United States, Canada and Mexico. NASAA has 67 members, including the securities regulators in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands with a shared mission of protecting investors from fraud and abuse in the offer and sale of securities. For more information, visit: www.nasaa.org. NASAA Contact: Jeanne Hamrick, (202) 737-0900.
FINRA:
FINRA is a not-for-profit organization dedicated to investor protection and market integrity. It regulates one critical part of the securities industry—brokerage firms doing business with the public in the United States. FINRA, overseen by the SEC, writes rules, examines for and enforces compliance with FINRA rules and federal securities laws, registers broker-dealer personnel and offers them education and training, and informs the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers a dispute resolution forum for investors and brokerage firms and their registered employees. For more information, visit www.finra.org. FINRA Contact: Angelita Williams, (202) 728-8988.