Financial Exploitation Prevention Act of 2025
The Financial Exploitation Prevention Act of 2025 would amend the Investment Company Act of 1940 to give registered open-end investment companies and their transfer agents the ability to postpone redemption payments when a security holder is a “specified adult” and financial exploitation is suspected or has occurred. The bill creates a framework for identifying a responsible contact person, notifying that person, and conducting internal reviews before delaying redemption proceeds (up to 15 days, with a possible 10-day extension, and potentially longer if allowed by state regulators or courts). It also requires new disclosures to investors, enhanced internal procedures and recordkeeping, and a formal SEC report within a year on further changes to address financial exploitation. The approach is optional for funds (funds must elect to adopt these rules) and targets non-institutional direct-at-fund accounts—retail accounts held directly with a fund and serviced by a transfer agent. In short, this bill aims to protect seniors and other vulnerable adults from financial exploitation by allowing delays in redemption payouts while investigations or protective steps are taken, and by imposing new requirements on funds and transfer agents to identify at-risk individuals and document their actions.
Key Points
- 1Optional election and contact framework (h(2)) for non-institutional direct-at-fund accounts: funds may elect to require contact information for at least one adult who can be reached about the account and may be contacted to address possible exploitation, confirm health status, or identify guardians or powers of attorney; this information must be documented and disclosed to the customer.
- 2Redemption postponement authority (i)(1)-(2): if a security is being redeemed by a specified adult and financial exploitation is suspected or occurring, the fund or transfer agent may postpone payment for more than seven days, up to 15 business days (with a possible additional 10 business days under certain conditions).
- 3Conditions for extension and required steps (i)(2)(B)-(E): extensions require reasonable belief of exploitation, timely written notification to the identified individuals (within 2 days of extending), an internal review, holding funds in a demand deposit account, and documentation/record retention of these actions.
- 4State or court extensions (i)(2)(C): state regulators or courts may further extend the postponement period beyond the extended limit.
- 5Compliance, disclosures, and records (i)(2)(E)-(G): funds must establish internal procedures for identifying exploitation, deciding whether to release or reinvest delayed proceeds, identify authorized personnel, and provide periodic reporting; statements must note the possibility of redemption postponement; and extensive recordkeeping with Commission-accessible documentation.
- 6Specified adult definition (i(3)): a specified adult is someone who is at least 65 years old, or at least 18 with a mental or physical impairment that reasonably renders them unable to protect their own interests.
- 7SEC review and recommendations ( subsection (b) ): within one year of enactment, the SEC must, in consultation with listed regulatory bodies (including CFTC, CFPB, FINRA, NASAA, the Federal Reserve, OCC, and FDIC), submit a report with recommendations on regulatory and legislative changes to address financial exploitation of specified adults.