FINRA proposal to limit Associated Persons Acting for Customer Trusts

The Financial Industry Regulatory Authority (FINRA) has recently proposed a rule (Rule 3241 “Registered Person Being Named a Customer’s Beneficiary or Holding a Position of Trust for a Customer”) to the U.S. Securities and Exchange Commission (SEC) that aims “to create a uniform, national standard to govern registered persons holding positions of trust.”

This rule would prevent certain associated persons to act as beneficiaries, executors or trustees, on behalf of or for a customer (unless the customer is a member of the registered person’s family). In particular, it would create an obligation for a registered person to:

  • Provide written notice and receive written approval from their firm if named as beneficiary of a customer’s estate or if receiving a bequest from a customer’s estate;
  • Do 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.”

Furthermore, the employing firm will have to formally assess the risks of the operation and, if authorization is granted, supervise the compliance of the relationship on a continuous basis.