FINRA Provides Helpful Hints Regarding Granting Power of Attorney

What happens if you become incapacitated and unable to manage your financial affairs? To avoid facing that unfortunate dilemma, investors should consider appointing a trusted person (such as a sibling, spouse, adult child or close friend) as power of attorney over their finances in the event they are unable to handle them independently at some future point. Granting power of attorney is a decision that involves trust, but also caution, as FINRA warns that these types of arrangements can be used as a vehicle for abuse. Gerri Walsh, FINRA’s Senior Vice President of Investor Education, cautioned that while having a trusted power of attorney can be helpful, it is important for investors to understand what granting power of attorney means and what the power of attorney covers. FINRA recently released an Investor Alert to highlight some helpful tips for investors to consider when granting power of attorney.

FINRA cautioned that investors should select an agent who understands their investment objectives, risk tolerance and goals, and should ensure they never feel pressured or forced to sign a document granting power of attorney. FINRA also suggests making clear in the power of attorney document when an agent’s authority would take effect, and when that authority would be rescinded. If these terms are not made clear, they can be left up to interpretation by the courts and may not reflect the investor’s intentions. More guidance from FINRA regarding power of attorney can be found here.

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About Christine Goodrich

Christine E. Goodrich is a Senior Associate with Faruqi & Faruqi, LLP’s New York City office. Ms. Goodrich’s practice is focused in securities arbitration, litigation and regulation.

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