The Importance of Establishing a Trusted Contact
The Tennessee Securities Division is joining the Financial Industry Regulator Authority (FINRA), the North American Securities Administrators Association (NASAA) and the U.S. Securities & Exchange Commission’s Office of Investor Education and Advocacy (SEC OIEA) in urging financial investors to provide their financial firms with a “trusted contact.”
“The ability to add a trusted contact to your financial accounts is such an important part of investor safety,” said Securities Division Assistant Commissioner Elizabeth Bowling in a recent press release [LINK]. “We want this campaign to spark a conversation between investors and their financial firms, and we strongly encourage all Tennessee investors to review the materials, ask questions and contact their financial firms to name a trusted contact today.”
What is a trusted contact?
A trusted contact is a person you authorize your financial firm to contact in limited circumstances, such as if there is a concern about activity in your account and they have been unable to get in touch with you.
A trusted contact may be a family member, attorney, accountant or another third-party who you believe would respect your privacy and know how to handle the responsibility. You may establish more than one trusted contact.
Why is my financial firm asking me for a trusted contact?
Your financial firm may request that you give them the name and contact information of a trusted contact. While it is not mandatory that you do so, the Tennessee Securities Division, FINRA, NASAA and staff from the SEC Office of Investor Education and Advocacy urge you to consider providing the name of someone you trust as a contact on your accounts.
Who should have a trusted contact?
The Tennessee Securities Division suggests a trusted contact for anyone who has an investment account.
Why should I add a trusted contact to my account?
Having one or more trusted contacts provides another layer of safety on your account and puts your financial firm in a better position to help keep your account safe. Naming someone as a trusted contact does not give that person the authority to act on your behalf, execute transactions or reengage in activity in your account.
How does having a trusted contact help me?
Perhaps you a traveling, displaced by a natural disaster, experiencing a health issue or there is a concern about fraud – whatever the issue, a trusted contact can help your financial firm connect with you.
A trusted contact may be asked to confirm your current contact information, health status or the identity of any legal guardian, executor, trustee or holder of a power of attorney. U.S. broker-dealers are required to provide (other financial firms may provide) a written disclosure that lays out these details.
What authority does a trusted contact have on my account?
Establishing a trusted contact does not provide the designated person with authority to make transactions in your account and does not make that person a power of attorney, legal guardian, trustee or executor.
By designating a trusted contact, you are authorizing the firm to contact someone you trust and disclose information about your account only in limited circumstances. A firm may only disclose reasonable categories of information with a trusted contact, including information that will assist the firm in administering the customer’s account.
Unless separately authorized, a trusted contact:
- Cannot make trades in your account.
- Cannot make decisions about your account.
A trusted contact is simply someone who can help your financial firm help you – if necessary.
How do I add a trusted contact to my account?
You can contact your financial firm or investment professional and ask to add a trusted contact to your account at any time. You may also ask your financial firm to change or update your trusted contact information at any time.
You might be asked to add a trusted contact when you log on to your investment account online. Your financial firm may send notices to you, via email or regular mail, that include instructions for adding a trusted contact to your account. Before clicking on any link in an email notice about a trusted contact, make sure you verify that your firm sent the email.
If you do decide to name a trusted contact, you might want to reach out your trusted contact in advance to let them know.
- FINRA Securities Helpline for Seniors® | 844-57-HELPS (844-574-3577)
- SEC’s Office of Investor Education and Advocacy | investor.gov
- NASAA Investor Education | nasaa.org/investor-education
Rachel Carden serves as the Director of Investor Education for the Securities Division of the Tennessee Department of Commerce and Insurance.