HR2478-119

What This Bill Does

The Financial Exploitation Prevention Act of 2025 amends the Investment Company Act of 1940 so a registered open-end investment company or its transfer agent may elect to use special protections for direct-at-fund accounts. Participating companies must request trusted-contact information from non-institutional customers, keep that information, and disclose that the contact may be used to address suspected financial exploitation, confirm health or contact status, or identify a guardian, executor, trustee, or power-of-attorney holder. If the company or agent reasonably believes a redemption is requested by a specified adult and financial exploitation has occurred, is occurring, or has been attempted, it may delay payment for up to 15 business days, extend the delay by 10 more business days with notice and internal review, and receive protection from liability for good-faith actions.

Who Benefits and How

Older mutual fund investors and adults unable to protect their interests because of mental or physical impairment benefit because suspicious redemptions can be paused before money leaves the account. Trusted contact persons benefit because they can be notified when exploitation is suspected and can help identify guardians, trustees, executors, or power-of-attorney holders. Open-end investment companies and transfer agents benefit from a clear legal process and good-faith liability protection when delaying redemptions to stop suspected exploitation. The Securities and Exchange Commission benefits from a statutory study mandate to coordinate with banking, credit union, and State securities regulators on broader protections.

Who Bears the Burden and How

Open-end investment companies and transfer agents that elect the framework must collect trusted-contact information, retain records, provide written disclosures, notify contacts within two business days when extending delays, conduct internal reviews, segregate delayed redemption amounts, disclose the delay policy in prospectuses or statements of additional information, and notify the SEC of their election. Investors seeking immediate redemptions may wait up to 25 business days if the firm reasonably suspects exploitation. The SEC must consult with Federal and State regulators and report to Congress within one year on whether further rules are needed.

Key Provisions

• Allows open-end investment companies and transfer agents to elect the anti-exploitation redemption-delay framework by notifying the SEC.
• Requires trusted-contact requests, record retention, and written disclosures for direct-at-fund non-institutional accounts.
• Authorizes redemption delays of up to 15 business days when suspected exploitation involves a specified adult.
• Allows a 10-business-day extension if the firm gives notice, starts an internal review, and holds delayed amounts apart from other assets.
• Provides good-faith protection from liability for firms, transfer agents, and associated persons using the framework.
• Requires an SEC report, after consultation with seven other regulatory bodies, on additional protections against financial exploitation.