Certain states have recently proposed legislation requiring additional penalties for financial firms/advisors targeting seniors in scams. In addition, some states are staging undercover “stings,” sending investigators to the “free lunch seminars” that seem to be a breeding ground for scams. These seminars are often billed as “educational;” however, in many cases, seniors may experience a “hard sell” of investments which are inappropriate for their individual needs, or be given misleading information about an investment’s merit.
According to Jennifer Levitz’s May 19, 2009 article in the Wall Street Journal, “Laws Take on Financial Scams Against Seniors,” regulators believe that no investors are more vulnerable to scams than older people, who depend on their savings for a secure retirement. Experts say these scams are appearing with increased frequency during the recession. As more people are looking for “low-risk” investments, some firms are pushing products that are complex with significant downsides as a safe way to invest in the stock market. Other products, such as complex annuities, may restrict access to the savings that the seniors need to access in order to live. The state regulators and attorney generals of different states are reviewing these practices and taking action.
For example, in October 2007, a unit of Allianz SE agreed in a settlement with Minnesota’s attorney general to review sales practices and give refunds to as many as 7,000 Minnesota seniors that the state said may have been sold unsuitable annuities since 2001. Allianz has denied all charges in the case.
FINRA, the Financial Industry Regulatory Authority, brought over 3,000 enforcement actions against financial firms and sales people for violations against seniors in the seven years through January as compared with about 1,750 actions related to people approaching retirement. Seminars showcasing products are not illegal, however, financial advisors must follow suitability standards ? meaning the product must make sense given the person’s age, income, risk tolerance, and goals. In addition, sales materials must disclose all risks associated with the product. FINRA suggests that people beware of statements touting that a product is “as safe as cash” or has “no market or credit risk.”
Another area of concern is “adviser” services, where financial professionals offer to meet and review a senior’s assets to make sure they are prepared to deal with current market conditions as well as poised to take advantage of a potential upturn in the market. Although this may sound like a good idea, some unscrupulous financial professionals use this tactic to sell inappropriate investments or to generate high commissions or fees.
Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions, and have aided clients who have been the victims of financial adviser abuse and scams. Page Perry’s attorneys are actively involved in counseling institutional and individual investors regarding their investment problems. For further information, please contact us.