Securities brokers and other registered representatives often develop close relationships with their clients. Those clients may make provision for them to become a fiduciary or beneficiary in trusts and wills due to these relationships.
For those representatives who are subject to FINRA, new FINRA Rule 3241 becomes effective on February 15, 2021 that generally requires review and approval of such circumstances by member firms so as to avoid conflicts of interest. The new rules can be reviewed here.
Exceptions apply to representatives that are family members of the appointing client. In addition to direct appointments, the rules treat similarly circumstances where the representative directs the appointment of other persons in these roles such as family members of the representative.
Draftspersons should be familiar with these limitations, to assist their clients where they desire to make such appointments.
FINRA Rule 3241. Registered Person Being Named a Customer’s Beneficiary or Holding a Position of Trust for a Customer