The Wire and the Trusted Contact
Mrs. K., 84, is a widow with about $1.7 million at your branch, mostly CDs and a balanced fund. A trusted contact person - her daughter - was added to the account last year. In twenty years she has executed two wires. On Tuesday a man identifying himself as her nephew and power of attorney, "David," calls the service desk and requests a $250,000 wire to a title company for a "real estate investment" in another state. He faxes a power of attorney dated two weeks ago. When the rep calls Mrs. K. to confirm, she is pleasant but vague: "David takes care of these things now, he's so helpful." Asked about the property, she says, "I haven't seen it, but David says the returns are wonderful." She declines to speak with her daughter. The rep brings you the request at 3:40 p.m.
1. What supervisory tools and analysis apply to this request before anyone touches the wire?
Read the worked answer
Two FINRA rules frame the toolbox. Rule 4512 requires the firm to make reasonable efforts to obtain a trusted contact person, and Mrs. K. has one on file - the daughter. Rule 2165 permits a temporary hold on disbursement of funds or securities when the firm reasonably believes financial exploitation has occurred, is occurring, or will be attempted.
Separately, do not treat the power of attorney as a substitute for the customer's instruction. A POA is a legal document the firm must review and accept on its own terms; it does not convert a suspicious request into an authorized one, and it certainly does not override the customer's own capacity questions.
Risk factors present: a brand-new POA; a change in the pattern of a 20-year relationship (two wires ever); a large, urgent disbursement to an unfamiliar third party in another state; a customer who cannot describe the investment; and isolation from the previously designated trusted contact. That combination is enough to justify escalation before execution, and the firm should not let the request sit unanswered past the close of business without a documented decision.
2. Would you place a hold? Walk through Rule 2165's conditions, duration, and documentation.
Read the worked answer
Yes - on these facts a hold is supportable, but it must be built properly.
Reasonable belief of exploitation. Rule 2165 requires a reasonable belief, not proof. The new POA, the vague customer, the inability to describe the asset, the urgency, and the isolation from the daughter support that belief. Document each fact and who observed it.
Trusted contact notice. The firm must make reasonable efforts to notify the trusted contact - unless the firm reasonably believes the trusted contact is the one exploiting the customer. Here the trusted contact is the daughter, not David, so call her. If she cannot be reached, the hold may still proceed.
Duration. The initial hold may last up to 15 business days. The firm may extend it for up to 10 additional business days if the reason for the hold remains. The hold covers disbursements of funds or securities; it does not freeze trading or the account generally.
Documentation. Record the date and time, the facts relied on, the identity of the trusted contact and the result of the contact attempt, the start and end dates of the hold, and the name of the person who authorized it. Retain the records.
Adjacent steps. Consider state elder-exploitation reporting and a SAR (kept confidential - do not tell David or Mrs. K. a SAR was filed).
3. Suppose Mrs. K. calls back the next morning, sounds entirely lucid, insists the wire is legitimate, and says her daughter "meddles." What now?
Read the worked answer
The hold is temporary and investigative, not a permanent veto. A rule-compliant hold buys time; it does not give the firm the right to refuse a capable customer indefinitely.
Take these steps: (1) have a principal, not the original rep, conduct the call and document it verbatim; (2) ask open, non-leading questions - what the property is, where it is, who she has spoken to, whether she has seen any documents, and whether she has independent counsel; (3) independently verify the title company through a number the firm sources itself, not the one David supplied; (4) offer, without pressure, to have the daughter on the call. If she affirms clearly and consistently, release the wire, document the basis for concluding there is no reasonable belief of exploitation, and note the hold's start and end dates.
If the answers remain thin or inconsistent, extend the hold within the 10-business-day extension, involve counsel, and consider adult protective services. The key supervisory point: either decision is defensible if it is reasoned and documented, and neither is defensible if it is reflex. Keep the file clean enough to show a regulator exactly what you knew and when.