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Letter Summary:
While the scope of the Proposed Amendments is narrow, the removal of the requirement to involve a second Approved Person opens up the possibility of mismanagement and/or fraud, in those rare circumstances where an Approved Person could seek to take advantage of a vulnerable family member, particularly seniors. Short of fraud or similar conduct, it is possible that, again, in rare instances, an Approved Person could rely on the trust placed in them by family members, who may be unsophisticated retail investors, to engage in activities (such as excessive trading) that they would not engage in for other clients or if the safeguard that there was a second Approved Person on the account existed. A growing number of seniors rely on their advisers, and we believe a high level of investor protection in this area is warranted, particularly if questions of competency arise.
Overview of the Council’s Comments:
We understand that under the current Rule, an Approved Person is permitted to act upon a general POA or similar authorization from a client where the client is a spouse, parent or child of the Approved Person, and that one of the conditions is that an Approved Person other than the Approved Person holding the POA must be the Approved Person of record on the account. Among
other changes, it is proposed that the requirement to transfer the account to another Approved Person be deleted. We are strongly opposed to this aspect of the Proposed Amendments, which we believe is a good control mechanism to protect potentially vulnerable investors.