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TDCI Securities Division Joins FINRA, NASAA and SEC OIEA to Urge Investors to Establish a Trusted Contact to Increase Investor Protection

Thursday, September 30, 2021 | 02:30pm

NASHVILLE – In a combined effort to provide additional protection for investors, the Financial Industry Regulatory Authority (FINRA) and the North American Securities Administrators Association (NASAA) have announced a new campaign urging investors to provide their financial firms with a trusted contact. The U.S. Securities and Exchange Commission’s Office of Investor Education and Advocacy (SEC OIEA) is also collaborating on this initiative.

A trusted contact is an individual authorized by an investor to be contacted by their financial firm in limited circumstances. These circumstances would include concerns about activity in the investor’s account or if the firm has been unable to reach the investor after numerous attempts. A trusted contact may be a family member, attorney, accountant or another reliable third party; and investors may establish more than one trusted contact and may add or change a trusted contact at any time.

FINRA Rule 4512 requires FINRA member firms to ask an investor for the name and contact information of a trusted contact person when opening a non-institutional customer’s account or when updating account information for a non-institutional account. A trusted contact can help firms connect with investors to confirm current contact information, health status or the identity of any legal guardian, executor, trustee or holder of a power of attorney.

“Investor protection is at the core of FINRA's mission and this collaborative effort with NASAA and the SEC OIEA reflects our shared commitment to better inform and protect investors,” said FINRA President and Chief Executive Officer Robert Cook. “All investors can benefit from adding a trusted contact to their account—having one or more trusted contacts provides another layer of security on the account and puts the financial firm in a better position to help keep the account safe.”

The Securities Division of the Tennessee Department of Commerce and insurance also recognizes the importance of this initiative.

“The ability to add a trusted contact to your financial accounts is such an important part of investor safety,” said TDCI Securities Division Assistant Commissioner Elizabeth Bowling. “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.”

A full list of Q&As and a video can be found in the Securities Division’s latest blog on this topic. It details how a trusted contact can help investors when the firm cannot reach the account holder(s), as well as reminding investors that financial firms may reach out to trusted contacts only in limited circumstances, noting that a trusted contact:

  • Cannot make trades in the investor’s account;
  • Cannot make decisions about the investor’s account; and
  • Does not become a power of attorney, legal guardian, trustee or executor by virtue of being identified as a trusted contact.

For more information, visit finra.org/trustedcontact, tn.gov/securities or contact TDCI’s Securities Division at 800-863-9117.

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About the Tennessee Department of Commerce & Insurance: Fostering fair marketplaces, public safety, and consumer education that promote the success of individuals and businesses while serving as innovative leaders. Our divisions include the State Fire Marshal’s Office, Insurance, Securities, Regulatory Boards, Tennessee Law Enforcement Training Academy, Tennessee Emergency Communications Board and TennCare Oversight. For more information, visit tn.gov/commerce.

About FINRA: FINRA is a not-for-profit organization dedicated to investor protection and market integrity. It regulates one critical part of the securities industry— brokerage firms doing business with the public in the United States. FINRA, overseen by the SEC, writes rules, examines for and enforces compliance with FINRA rules and federal securities laws, registers broker-dealer personnel and offers them education and training, and informs the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers a dispute resolution forum for investors and brokerage firms and their registered employees. For more information, visit finra.org.

About NASAA: Formed in 1919, NASAA is a nonprofit association of state, provincial and territorial securities regulators in the United States, Canada and Mexico. NASAA has 67 members, including the securities regulators in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands with a shared mission of protecting investors from fraud and abuse in the offer and sale of securities. For more information, visit nasaa.org.