Financial Exploitation Prevention Act of 2025
Summary
The Financial Exploitation Prevention Act of 2025 amends the Investment Company Act of 1940. It aims to protect specified adults (those 65 or older, or those over 18 with impairments) from financial exploitation related to the redemption of securities. The bill allows registered open-end investment companies and transfer agents to postpone the payment or satisfaction upon redemption of securities if they reasonably believe financial exploitation is occurring.
Expected Effects
The Act will enable investment companies to delay redemptions under specific circumstances. This delay is intended to provide time to investigate potential exploitation. The SEC is required to submit a report to Congress with recommendations for further regulatory and legislative changes to address financial exploitation of security holders.
Potential Benefits
- Provides a mechanism to protect vulnerable adults from financial exploitation.
- Requires investment companies to request contact information for individuals who can be contacted regarding a customer's account.
- Mandates internal reviews and record-keeping related to delayed redemptions.
- Requires the SEC to provide recommendations for further regulatory and legislative changes.
- Offers flexibility for companies to postpone redemptions for a limited time, balancing protection with investor access to funds.
Most Benefited Areas:
Potential Disadvantages
- May temporarily restrict access to funds for legitimate transactions, causing inconvenience.
- Requires additional administrative procedures for investment companies and transfer agents, potentially increasing costs.
- Could lead to disputes regarding the determination of financial exploitation.
- The definition of 'specified adult' may be subject to interpretation and potential abuse.
- Notification requirements could inadvertently alert exploiters.
Constitutional Alignment
The Act aligns with the Constitution's broad goals of promoting the general welfare. While the Constitution does not explicitly address financial regulations of this nature, Congress has the power to regulate interstate commerce, which includes the securities industry (Article I, Section 8, Clause 3). The Act does not appear to infringe upon individual liberties or rights protected by the Bill of Rights.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).