Technical corrections only. The changes between v3 and v4 reflect the bill's procedural status update, noting its referral to the Senate and the inclusion of the House Clerk's name. No substantive policy changes were made.
Financial Exploitation Prevention Act of 2025
- Sponsor
- Rep. Wagner, Ann [R-MO-2]
- Committees
- Financial Services Committee (primary)
- Last action
- Jul 13, 2026
Bottom line
The bill provides financial institutions with a voluntary mechanism to pause suspicious redemption requests from vulnerable adults, aiming to prevent financial exploitation while requiring customer consent for trusted contacts and mandating robust internal oversight.
What it actually does
This bill amends the Investment Company Act of 1940 to allow registered open-end investment companies and their transfer agents to temporarily postpone the redemption of securities for 'specified adults' if there is a reasonable belief of financial exploitation. It also requires these entities, if they elect to participate, to request and retain contact information for a trusted individual for non-institutional direct-at-fund accounts, and to establish detailed internal procedures for managing these postponements.
Proponents argue
Proponents argue that this bill provides a crucial, timely tool for financial institutions to protect elderly and vulnerable investors from predatory schemes, allowing a necessary window to investigate and intervene before funds are irrevocably lost. They contend it carefully balances investor access to funds with essential safeguards against a growing problem.
Opponents contend
Opponents might express concerns that the bill grants significant discretion to financial institutions, potentially leading to delays in legitimate redemptions or privacy implications regarding trusted contact information. They could argue that even temporary holds might inadvertently restrict access to funds for those who genuinely need them quickly, causing undue hardship.
The bill is concise and its core provisions are clearly articulated, making it accessible for a quick but informed read by an interested party.
Section 2(a), adding new subsection 22(h)(1) to the Investment Company Act of 1940
Voluntary Election for Financial Exploitation Prevention Measures
This provision establishes that registered open-end investment companies and their transfer agents can choose to comply with the new requirements related to financial exploitation prevention. The subsequent requirements outlined in the bill only apply to those entities that explicitly notify the Securities and Exchange Commission (SEC) of their election to participate.
Supporters argue
Supporters would argue that making this election voluntary allows companies to assess their own capacity and client base, ensuring that only those prepared to implement the safeguards do so, while still providing a valuable tool for investor protection.
Critics contend
Critics might argue that making it voluntary could lead to uneven protection for investors, as some companies might choose not to opt-in, leaving their customers vulnerable. They might prefer a mandatory approach for broader coverage.
Tradeoffs
This provision balances regulatory burden and industry flexibility against the goal of universal investor protection.
Section 2(a), adding new subsection 22(h)(2) to the Investment Company Act of 1940
Request for Trusted Contact Information for Direct-at-Fund Accounts
For non-institutional accounts held directly with a participating open-end investment company and serviced by a transfer agent, the company and transfer agent must request the name and contact information of at least one adult individual who may be contacted about the account. They must document this information and disclose to the customer in writing that this contact may be used to address suspected financial exploitation, confirm customer contact/health status, or identify legal guardians.
Section 2(a), adding new subsection 22(i)(1) to the Investment Company Act of 1940
Temporary Postponement of Redemptions for Specified Adults
This provision allows a participating registered open-end investment company or its transfer agent to postpone the payment upon redemption of a redeemable security for more than seven days. This can occur if they reasonably believe the redemption is requested by a 'specified adult' and that financial exploitation has occurred, is occurring, or has been attempted with respect to that redemption.
Section 2(a), adding new subsection 22(i)(2) to the Investment Company Act of 1940
Limits and Extensions for Redemption Postponements
The initial postponement period is limited to 15 business days. This period can be extended by an additional 10 business days if the company continues to reasonably believe exploitation is occurring, notifies trusted contacts (unless the contact is suspected of exploitation), initiates an internal review, holds funds in a demand deposit account, and documents these actions. State regulators, administrative agencies, or courts can also extend the period beyond these limits.
Section 2(a), adding new subsections 22(i)(2)(E)-(G) to the Investment Company Act of 1940
Mandated Internal Procedures and Record-Keeping for Postponements
Participating companies and transfer agents must establish comprehensive internal procedures for identifying and reporting financial exploitation, determining whether to release or reinvest delayed funds, and identifying employees authorized to initiate, extend, or terminate holds. They must also ensure compliance, include notification of potential postponements in prospectuses, and retain detailed records of all postponements, findings, notifications, and internal review results, making these records available to the SEC upon request.
Section 2(a), adding new subsection 22(i)(3) to the Investment Company Act of 1940
Definition of Vulnerable Adults
This provision defines 'specified adult' as an individual age 65 or older, or an individual age 18 or older whom a registered open-end investment company or transfer agent reasonably believes has a mental or physical impairment that renders them unable to protect their own interests. This definition determines who is eligible for the protections outlined in the bill.
Section 2(b)
SEC Report on Financial Exploitation Prevention
This provision requires the Securities and Exchange Commission (SEC), in consultation with several other financial regulatory entities, to submit a report to Congress within one year of the bill's enactment. This report must include recommendations for regulatory and legislative changes needed to further address the financial exploitation of specified adults.
This provision states that the requirement to notify a trusted contact about an extended redemption postponement does not apply if the company or transfer agent reasonably believes that the trusted contact is, has been, or will subject the security holder who identified such individual to financial exploitation.
Section 2(a), adding new subsection 22(i)(2)(D)(i) to the Investment Company Act of 1940
Why it matters:This is standard legislative practice for detailing exceptions to general rules, ensuring the primary intent of the notification (protection) isn't undermined by unintended consequences (notifying an exploiter). It's a necessary safeguard to prevent tipping off the perpetrator.
Case for: Proponents would argue this exception is crucial to prevent the very individuals who are exploiting a vulnerable adult from being alerted to the investigation, thereby protecting the victim and the integrity of the intervention.
Case against: Critics might argue that determining a trusted contact is an exploiter is a significant judgment call with potential for error, and withholding notification could be seen as a lack of transparency, though this is a less common argument given the protective intent.
Estimated impact: Prevents potential further harm to an unknown number of specified adults by not tipping off their suspected exploiters, thereby enhancing the effectiveness of the anti-exploitation measures.