FINRA Rule 3241 requires firms to approve brokers serving in positions of trust, such as beneficiary or executor, for clients.
The Financial Industry Regulatory Authority (FINRA) has implemented a new rule– FINRA Rule 3241 — to limit brokers from holding positions of trust for clients, according to reports this week.
The rule, Registered Person Being Named a Customer’s Beneficiary or Holding a Position of Trust for a Customer, requires all member firms to affirmatively address registered persons being named beneficiaries or holding positions of trusts for customers.
The member firm with which the registered person is associated, upon receiving required written notice from the registered person, to review and approve or disapprove the registered person assuming such status or acting in such capacity, according to FINRA.
The rule, effective Feb. 15, 2021,does not apply where the customer is a member of the registered person’s immediate family.
FINRA claims that the rule creates a uniform, national standard to govern registered persons holding positions of trust, better protects investors and provides consistency across member firms’ policies and procedures.
Under the rule, a registered person must decline:
(1) being named a beneficiary of a customer’s estate or receiving a bequest from a customer’s estate upon learning of such status unless the registered person provides written notice upon learning of such status and receives written approval from the member firm prior to being named a beneficiary of a customer’s estate or receiving a bequest from a customer’s estate; and
(2) being named as an executor or trustee or holding a power of attorney or similar position for or on behalf of a customer unless: upon learning of such status, the registered person provides written notice and receives written approval from the member firm prior to acting in such capacity or receiving any fees, assets or other benefit in relation to acting in such capacity; and the registered person does not derive financial gain from acting in such capacity other than from fees or other charges that are reasonable and customary for acting in such capacity.
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Tags: broker as executor, broker client beneficiary, can a broker be a customer’s beneficiary?, FINRA Rule 3241, FINRA rules for beneficiaries Last modified: November 3, 2020