FINRA Requires Firm Approval of Beneficiary/Trustee/Executor/PoA Relationships
FINRA has adopted a new rule that requires registered representatives to obtain firm approval before a client names the rep an estate beneficiary, trustee, or executor or grants a power of attorney. If the rep doesn’t know s/he has been named, the rep must provide written notice to the firm upon learning of such status. The rule includes accounts from a prior firm during the preceding 6 months and requires the rep to inform the new firm of all such accounts upon joining. The firm can only approve the designation after a reasonable assessment of multiple factors including conflicts of interest, client mental/physical condition, indicia of improper activity, and the size of the estate/grant. The firm also must ensure supervision of any conditions or limitations on permitted activities.
FINRA should have just banned these relationships to put all firms on an equal playing field. Most larger firms will likely prohibit reps from accepting these roles rather than risk getting second-guessed for their approval and supervision processes. Meanwhile, dodgier firms will offer a safe-haven for reps that continue to take on these roles, betting the risk is worth the revenue.