Business Compliance Partners Warns Seniors Increasing Target of Financial Abuse

Share Article

“It has been estimated that at least one in five Americans over the age of 65 – that’s 7.3 million seniors – has been victimized by financial fraud. It is the responsibility of regulators to represent the vulnerable by writing and enforcing rules that reduce the opportunity for fraud to take place,” said Chief of Staff, Smeeta Ramarathnam.

The quote about the victimization of seniors is from a speech that was delivered at the recent American Retirement Summit in Washington, D.C. on behalf of Securities and Exchange Commissioner, Luis A. Aguilar by his Chief of Staff, Smeeta Ramarathnam. Ramarathnam also stated that the financial exploitation of the elderly is on the rise because of various factors, the most important being the distribution of wealth.

A Pew Research Center study, “The Rising Age Gap in Economic Well-Being,” supports the distribution of wealth claim. The study found that the median net worth of households headed by 35 to 44 year olds was $39,601, $101,651 for 45 to 54 year olds, $162,065 for 55 to 64 year olds and $170,494 for those 65 and older.

Business Compliance Partners assists Securities and Exchange Commission and state regulated firms with implementing and effectively managing their regulatory compliance programs.

State securities regulators, the Investor Protection Trust, National Adult Protective Services Association, American Academy of Family Physicians, National Area Health Education Center Organization and the National Association of Geriatric Education Centers are collaborating to educate medical professionals and caregivers about how to identify seniors who may be vulnerable to financial abuse by starting the Elder Investment Fraud and Financial Exploitation (“EIFFE”) Prevention Program.

Isolation, mild cognitive impairment and more serious neurological issues can make some seniors more susceptible to financial abuse. Reference information can be found in the Clinician’s Pocket Guide, Senior Patient Education Brochure, ABCs for APS Professionals: How to Identify and Report Investment Fraud pamphlet, and Elder Investment Fraud: A National Epidemic video, among other resources.

Financial, legal, accounting and other professionals may also have close contacts with seniors or are in a position to recognize unusual behavior based on erratic financial transactions. The EIFFE Prevention Program wants to give professionals, as well as relatives, the tools to recognize and report investment fraud, suspected abuse or symptoms of mild cognitive impairment.

Currently 27 state securities regulators have joined the EIFFE program. Business Compliance Partners can help investment advisors and broker dealers add EIFFE prevention training to their compliance programs.

The SEC received authorization to implement the Senior Investor Protection Program; its mission is to develop ways to educate seniors about and protect them from investment fraud.

The SEC can direct funding to the states to assist with carrying out the initiatives and may impose additional penalties for violations of regulations when they impact investors 62 or older.

Regulators concern about fraudsters targeting seniors has been growing. The North American Securities Administrators Association (“NASAA”) conducted a survey entitled “NASAA Survey Shows Senior Investment Fraud Accounts for Nearly Half of all Complaints Received by State Securities Regulators”. Their findings indicate that individuals 60 and older were victims of fraud at double their percentage in the population.

The survey has led to a broader effort to quantify the scope of the problem. The Financial Industry Regulatory Authority (“FINRA”), the SEC and NASAA examined financial services firms and jointly issued a report “Protecting Senior Investors: Report of Examinations of Securities Firms Providing “Free Lunch” Sales Seminars”.

Through coordinated on-site examinations they discovered that financial services firms were targeting seniors by selling them financial products through seminars that offered a free meal and other incentives to attend.

In over half of all examinations, they found seminar related advertising and sales materials may have been misleading, exaggerated or included unwarranted claims about safety, liquidity or projected rates of returns on investments discussed.

Companies with a financial interest in products being recommended were also sponsoring some of the seminars and the relationships were never disclosed in seminar materials or during the seminars.

Regulators found recommendations to purchase unsuitable investments were made in over 20% of the examinations they conducted and actions may have risen to the level of fraud in 13%. Examples included sales of fictitious investments, liquidation of accounts without the customer’s knowledge or consent, and serious misrepresentations of risk and return.

The joint report noted that 75% of consumer financial assets were held by households headed by someone who is 50 or older so group members were likely future targets. This prompted NASAA to establish a “Free Lunch” monitoring program in conjunction with AARP.

Regulators have issued “Senior Investor” alerts, in part because of the significant increase in the number of individuals using “senior specialists” and similar designations to imply that they have expertise providing services to investors 55 years and older. In some cases the designation holders only had to complete minimal training in marketing and selling techniques to earn the designation. Some holders were not even properly licensed by state securities regulators.

FINRA created a guide to Professional Designations in response. FINRA BrokerCheck and the SEC's Investment Adviser Public Disclosure were also enhanced; enhancements to the databases continue on an ongoing basis. The free databases provide information about broker-dealers, investment advisers, registered representatives of broker-dealers and investment adviser representatives, including past complaints or regulatory actions by securities regulators and criminal authorities and other background information

Department of Health & Human Services figures indicate that persons 65 years or older represented 12.9% of the U.S. population in 2009 but by 2030 will represent 19%. Demographics suggest that fraudster and regulatory focus will remain on seniors in the foreseeable future.

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Paul Cox

Chris Kosifas
Visit website