Financial Exploitation Prevention Act of 2025
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The bill would let mutual fund companies and their transfer agents delay redemption payments for up to 25 days when they reasonably suspect an older or impaired customer is being financially exploited.
It would also require these firms to collect a trusted contact person for direct-held accounts and require the SEC to recommend further steps to curb exploitation of vulnerable investors.
What this bill would do
What it would do
The bill would amend the Investment Company Act of 1940 to let a registered open-end investment company (such as a mutual fund) or its transfer agent postpone paying out a redemption for more than the normal seven days if they reasonably believe the redemption involves financial exploitation of a security holder age 65 or older, or an adult with a mental or physical impairment that leaves them unable to protect their own interests. The initial delay could last up to 15 business days, extendable by 10 more days upon a determination of exploitation, with further extensions possible by a state regulator, agency, or court. Firms would have to notify a designated trusted contact, hold delayed funds in a demand deposit account, and document their actions. Firms that elect to use these procedures must notify the SEC and adopt internal review, reporting, and record-keeping procedures, disclose the postponement authority in fund prospectuses, and request trusted-contact information for direct-held accounts. The SEC, consulting with several other regulators, must report to Congress within a year with recommendations on further changes.
Key provisions
- 1Would allow investment companies and transfer agents to postpone redemption payments beyond seven days if they suspect financial exploitation of an older or impaired adult
- 2Would cap the initial postponement at 15 business days, extendable by 10 more days upon a determination of exploitation
- 3Would allow state regulators, administrative agencies, or courts to further extend the postponement period
- 4Would require firms to request trusted-contact information from customers with direct-held accounts and disclose the postponement authority in prospectuses
- 5Would require firms to hold delayed redemption amounts in a demand deposit account and maintain records of postponements and internal reviews
- 6Would require the SEC, in consultation with other financial regulators, to report recommendations to Congress on addressing financial exploitation of specified adults
Who would be affected
Registered open-end investment companies (mutual funds) and their transfer agents, and their customers age 65 or older or with qualifying impairments who hold accounts directly with the fund. Trusted contacts designated by those customers, state regulators, and the Securities and Exchange Commission and other financial regulators consulted on the required report are also affected.
Why it matters
Older or impaired investors suspected of being financially exploited could see their redemption requests delayed for weeks rather than processed within the normal seven-day window, potentially preventing fraud but also temporarily restricting access to their own funds. Funds and transfer agents would gain new legal cover and procedural obligations for intervening in suspected exploitation cases.
What would change
Changes to existing law
Amends Investment Company Act of 1940 (15 U.S.C. 80a-22) (Sec. 2(a))
Adds new subsections allowing postponement of redemption payments for suspected financial exploitation of specified adults and setting related procedures.
Agencies directed to act
Effective dates
- SEC report to Congress with recommendations on exploitation of specified adults
Funding and costs
Congressional Budget Office estimate
CBO estimates that enacting H.R. 2478 would have no significant effect on the federal budget, increasing direct spending and decreasing revenues by less than $500,000 combined over the 2026–2036 period.
CBO estimates the bill would increase direct spending and decrease revenues by less than $500,000 each over the 2026–2036 period, with a negligible net effect on the deficit. The main cost driver is the SEC's one-time study and report to Congress on policies to mitigate financial exploitation of vulnerable adults, estimated at roughly $2 million in discretionary (appropriated) spending over 2026–2031 — but because the SEC is authorized to collect offsetting fees, the net discretionary impact is expected to be negligible. The bill contains no intergovernmental mandates; it does impose a private-sector mandate (through potential fee increases on regulated financial institutions), but CBO estimates its cost would be well below UMRA's annual private-sector threshold of $214 million.
How implementation would work
Investment companies and transfer agents that opt in must notify the SEC of their election, establish internal procedures for identifying exploitation, designate employees authorized to impose or extend delays, and set up periodic reporting between transfer agents and fund companies. They must attempt to notify a customer's designated trusted contact within two days of an extension, document and retain records of postponements and reviews, make records available to the SEC on request, and disclose the postponement authority in fund prospectuses. Within one year of enactment, the SEC must consult with the CFTC, Consumer Financial Protection Bureau, FINRA, NASAA, Federal Reserve, Comptroller of the Currency, and FDIC to report recommendations to Congress.
Legislative status & sources
Latest action
Motion to reconsider laid on the table Agreed to without objection.
Official CRS summary
Show the CRS summaryHide the CRS summary
This bill establishes procedures for delaying the redemption of certain securities if an investment company or agent believes that an older individual or an individual with certain impairments has been financially exploited.
Specifically, the bill allows for the delay of the redemption of a security issued by an open-end investment management company and serviced by a transfer agent if the company or agent reasonably believes the redemption involves the financial exploitation of an individual (1) age 65 or older, or (2) age 18 or older who is unable to protect his or her own interests due to a mental or physical impairment. (Open-end investment management companies offer securities in pooled investment vehicles such as mutual funds. Transfer agents facilitate certain transactions for corporations and investment companies, including dividend distribution and change of securities ownership.)
The company may initially delay the redemption for up to 15 days and, upon making a determination of exploitation, may delay the redemption an additional 10 days. A state regulator, appropriate administrative agency, or court may extend this period. In the event of delay, the company must hold the amounts related to the redemption in a demand deposit account. The bill also establishes notification requirements.
The bill requires the registered open-end investment company and transfer agent to notify the Securities and Exchange Commission (SEC) if they elect to comply with the procedures established under this bill.
Additionally, the SEC must make recommendations to address the financial exploitation of these adults.
Legislative subjects
Administrative law and regulatory procedures; Congressional oversight; Crime victims; Finance and Financial Sector; Fraud offenses and financial crimes; Government information and archives; Government studies and investigations; Securities; Securities and Exchange Commission (SEC)
Committee report
H. Rept. 119-361