FINRA Proposes Safe Harbor for Delays in Acting on Dubious Instructions

FINRA proposed a safe harbor letting member firms delay transactions or disbursements when they reasonably believe a customer has been targeted by third-party fraud. The rule would define fraud as a deceptive scheme perpetrated by a third party that targets a customer and results in a request for a disbursement or securities transaction based on false or misleading information.

The filing responds to comments on FINRA's earlier notice and sets out the new framework, which supplements existing senior financial-exploitation protections.

Proposed Rule 2166 ("Temporary Delays for Suspected Fraud") would allow a hold of up to 10 business days, rather than the originally proposed five, based on commenter feedback that more time was needed for outreach and investigation. FINRA said the "reasonable belief" standard is intentionally flexible to fit varied facts.

The proposal would also extend the maximum hold period under Rule 2165 ("Financial Exploitation of Specified Adults") from 55 to 145 business days, in three 30-business-day increments subject to safeguards.

Amendments to Rule 4512 ("Customer Account Information") would (i) let firms use "emergency contact" as an alternative to "trusted contact person," and (ii) let a firm seek the customer's authorization to apply one trusted contact across all of the customer's existing and future accounts, provided the customer is also offered the choice to assign the contact account by account. Proposed Rule 2166 would provide a safe harbor from FINRA Rules 2010 ("Standards of Commercial Honor and Principles of Trade"), 2150 ("Improper Use of Customers' Securities or Funds; Prohibition Against Guarantees and Sharing in Accounts"), and 11870 ("Customer Account Transfer Contracts") for firms acting in accordance with the rule.

One commenter asked FINRA to make suspected fraud a permissible basis to delay action upon an account transfer instruction. FINRA said Rule 11870 amendments fall outside this proposal's scope, and that it is separately considering steps to address account opening and transfer fraud. FINRA also stressed the framework is permissive. Supplementary Material .01 of proposed Rule 2166 makes clear that firms are not required to place temporary delays, and the rules create no private right of action.

Comments are due September 30, 2026.