FINRA Wants Heightened Review of Client Instructions
FINRA has warned its members to step up procedures and monitoring of instructions to transmit or withdraw funds from customer accounts. FINRA has expressed concern about recent cases involving the misappropriation of client funds including fraudulent letters of authorization from purported client representatives such as investment advisers. Citing Rule 3012, FINRA requests firms to consider their policies and procedures regarding transmittal of funds to third-party accounts, outside entities, to an address other than the customer’s, and to a registered representative. FINRA suggests that firms (a) verify powers of attorney including their scope; (b) verify identities of purported third party representatives; (c) conceal internal dollar amount thresholds that trigger review; (d) conduct random sampling of routine transfers; and (e) ensure the proper functioning of automated systems.
OUR TAKE: Enhanced procedures will slow down money movements even for legitimate requests by investment advisers and other client representatives.