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House subcommittee hears bipartisan calls for faster detection, short holds and better coordination to curb investor fraud
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Summary
Witnesses and members at the House Financial Services subcommittee hearing described an expanding, technology‑enabled scourge of investment fraud that disproportionately hits seniors; witnesses urged more information sharing, limited temporary holds on suspicious redemptions and stronger interagency cooperation.
Chairwoman Wagner opened a subcommittee hearing titled "Safeguarding Main Street, combating fraud and exploitation in our capital markets," saying rising scams have cost Americans billions and frequently target seniors.
"These threats not only hurt American citizens, but they undermine the integrity of our capital markets," Wagner said in opening remarks, citing 2024 losses and new tools—social media and artificial intelligence—that make scams more convincing.
Brian Smith, senior vice president for complex investigations and intelligence at FINRA, told lawmakers that fraud now operates like a business and that FINRA's new Financial Intelligence Fusion Center speeds threat sharing among firms. "On its first day, three firms shared intelligence about a fraudulent scheme, and within three hours, FINRA had sent an alert notifying all firms about the issue," Smith said.
Jolene Gunther, national director of AARP's BankSafe initiative, described an upstream prevention approach and pointed to a Virginia Tech randomized study she said showed pauses on suspicious transactions and a trusted‑contact process are effective. "When we act earlier and act together, we can stop fraud before it turns into a devastating financial loss," Gunther said.
Matt Michel, founder of Investor Link Capital Markets, argued the private sector can generate early warning signals but that regulatory uncertainty prevents firms from acting on those signals. He cited HR 2478 and a proposed FINRA rule (referred to in testimony as proposed rule 21‑66) as examples of targeted mechanisms to give firms breathing room to investigate without imposing broad new mandates.
Professor Andrew Verstien of UCLA urged better enforcement and preservation of surveillance tools such as the consolidated audit trail, warning that deleted or reduced data hamstrings researchers and regulators trying to detect suspicious trades. He flagged concentrated trades ahead of public announcements as examples that merit investigation.
Throughout the question period, members from both parties pressed witnesses on how to block scams at the point of first contact—social media, telecom and online ads—and how to coordinate among the SEC, FINRA, DOJ, FBI, state regulators and technology platforms. Witnesses repeatedly promoted three interventions: (1) faster, more consistent information sharing; (2) a narrowly targeted pause or "speed bump" for suspicious transactions coupled with liability protections; and (3) expanded investor education and trusted‑contact practices at financial institutions.
No formal votes or committee actions were taken at the hearing. The chair closed the hearing and set a deadline for written follow‑up from witnesses.
