Financial Exploitation Bill Allows Up to 25-Day Hold on Securities Redemption for Adults 65+

A new piece of legislation, the Financial Exploitation Prevention Act of 2025, aims to give investment companies and their transfer agents a crucial tool to fight back against financial abuse targeting vulnerable investors. What this bill does, in short, is allow financial institutions to hit the pause button on certain investment withdrawals if they suspect foul play.

This isn't a mandatory rule for the entire industry; it's an opt-in program. Registered open-end investment companies and their transfer agents can choose to follow these new requirements. If they do, the rules apply to customers who hold accounts directly with the fund (non-institutional accounts). These firms must then request and document contact information for at least one adult who can be notified if the firm suspects financial exploitation. The customer is informed that the firm might contact this person to address potential abuse or confirm the customer’s status. This is the bill’s core mechanism: creating a legal way for a firm to intervene and alert a trusted third party when things look suspicious.

Who Gets the Protection (and the Red Tape)?

The protection applies to what the bill calls a “specified adult.” This includes two groups: individuals age 65 or older, and any individual age 18 or older whom the company reasonably believes has a mental or physical impairment that prevents them from protecting their own interests. This is a huge step toward legally recognizing and addressing the vulnerability of seniors and impaired adults in the financial system. For the firms that opt in, this means they now have a clear mandate to look out for these specific clients.

The Power to Freeze: Redemption Postponement

Here is where the rubber meets the road, and where things get complicated for the everyday investor. If an investment company or transfer agent reasonably believes two things are true—that the redemption request is from a specified adult, and that financial exploitation has happened, is happening, or was attempted—they can delay the payment of that redemption. This is a significant power.

Initially, the delay can last for up to 15 business days. However, if the firm starts an internal review and still reasonably believes exploitation is involved, they can extend that hold for an additional 10 business days, bringing the total possible delay to 25 business days (about five weeks). During this extension, the firm must notify the designated contact person about the hold and the reason for it. They also have to park the delayed funds in a demand deposit account and document the entire process.

The Trade-Off: Safety vs. Access

For the adult who is truly being exploited—say, an elderly parent being coerced by a family member to empty their retirement account—this delay is a lifeline. It gives law enforcement or family members time to step in before the money disappears. That’s the clear benefit of this bill.

However, the bill hangs on the firm’s “reasonable belief.” This is a subjective standard. What if an 80-year-old investor needs to sell shares quickly to pay for an unexpected medical bill or a home repair? If the firm’s compliance officer flags the transaction as suspicious—maybe because it’s a large, unusual withdrawal—that investor’s urgent, legitimate cash could be tied up for nearly a month. For someone living on a tight budget, a 25-day hold on needed funds could cause serious hardship. The bill doesn't offer a clear, objective threshold for what triggers this “reasonable belief,” leaving significant power in the hands of the financial institution.

Adding another layer of complexity, the firm can waive the notification requirement if they reasonably believe the designated contact person is actually the one doing the exploiting. While this protects the victim in a worst-case scenario, it also means the firm can unilaterally freeze an account for weeks without notifying anyone outside of their internal team, which raises questions about accountability and transparency.

Ultimately, this legislation is a well-intentioned attempt to combat a growing problem. It gives the financial industry a shield to protect vulnerable clients, but it also introduces a new layer of friction and potential delay for legitimate transactions. Firms that opt in will face increased compliance and record-keeping burdens, documenting every decision, notification, and internal review. The SEC is also required to consult with various regulatory bodies and submit a report to Congress within one year, suggesting this is just the first step in a broader regulatory push to protect seniors' assets.