Investment Management

Contact: Sara Soto, Rebecca E. Swenson; Bressler, Amery & Ross, P.C. (New Jersey, USA)

We recently tried a case involving a $1 million client bequest to a financial advisor.  The case reminded us of the issues presented when a firm is notified that one of its customers has made a bequest to his or her financial advisor.  There are no FINRA rules that specifically address this situation, nor any specific FINRA guidance.  Thus, there is no absolute, clear-cut prohibition preventing a financial advisor from accepting a client’s bequest.  Nonetheless, such bequests present the risk that family members or other interested parties dissatisfied with the client’s testamentary disposition could file a claim for breach of fiduciary duty, violation of FINRA Rule 2110 (Standards of Commercial Honor and Principals of Trade) or violation of elder abuse state statutes.  Thus, firms should find it useful to have policies and procedures in place to address these situations.

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