The US Financial Industry Regulatory Authority is proposing to make a new rule to oblige every firm that it regulates to review and grant prior approval to every registered person with whom it is associated who wants to be named as a customer’s beneficiary or to hold a position of trust for or on behalf of a customer.

• any potential conflicts of interest in the registered person being named a beneficiary or holding the position of trust;
• the length and type of relationship between the customer and registered person;
• the customer’s age;
• the size of any bequest relative to the size of a customer’s estate;
• whether, according to the facts and circumstances observed in the member’s business relationship with the customer, the customer has a mental or physical impairment;
• any indication of improper activity with respect to the customer or the customer’s account (e.g. excessive trading); and
• any indication (FINRA hilariously uses the FATCA word 'indicia') of vulnerability on the part of the customer or undue influence of the registered person over the customer.

A representative’s request to hold a position of trust for an elderly customer who had no relationship with him before the broker-customer relationship began is likely to pose risks that differ from a situation in which he asks to hold a position of trust for a longstanding friend. FINRA would not expect a registered person’s assertion that a customer has no viable alternative person to be named a beneficiary or to serve in a position of trust to be dispositive to the member firm’s assessment. One example that FINRA gives of an absence of financial exploitation is a registered person receiving a bequest from a customer who has been a friend/godparent since childhood.

Registered representatives move with some frequency between firms (again, somewhat amusingly, FINRA refers to its benighted charges as 'members'). If a registered person was named as a beneficiary or to a position of trust before he was associated with the 'member,' the proposal is to require the registered person, within 30 calendar days of becoming so associated, to provide notice to and receive approval from the member if he is to keep the status of beneficiary or position of trust.

There is, according to the regulator, more and more financial exploitation that involves weak investors. American regulators have always been quite keen to protect the elderly and this concern is now spreading to other parts of the vulnerable HNW investing public.