The Problem of Senior Investor Abuse – A Securities Attorney’s Perspective

The financial abuse of seniors continues to be a significant problem in the United States.  Nearly 40 million people are age 65 and older and the number is expected to grow to 89 million by 2050.  However, even though seniors comprise of a large portion of the population they make up the vast majority of clients that seek our firm’s assistance as securities attorneys.

Securities regulators have taken increased interest in recent years to stress to brokerage firms the need to implement increased supervision and devise specific policies to address issue facing senior investors.  FINRA recently published its 2014 Business Conduct Priorities where the regulator stated that its examiners will continue to focus on how firms engage with senior investors with a focus on suitability determinations as well as disclosures and communications.  FINRA has also stated that firms must develop policies and procedures to identify and address situations where issues of diminished capacity may be present.

In a 2010 article published by the SEC, the regulator summarized practices that financial services firms and brokers must adhere to in order to properly service the accounts of senior investors in areas including:

–        Communicating effectively with senior investors;

–        Training and educating firm employees on issues affecting seniors such as investment objective needs and diminished capacity;

–        Establishing an internal process for escalating issues affecting seniors;

–        Obtaining the proper information during the account opening process;

–        Ensuring the appropriateness of investments; and

–        Conducting senior-focused supervision and compliance reviews

FINRA noted that in 2013, the SEC and FINRA initiated an assessment of firms’ policies and practices with respect to their senior investor clients.  The assessment focused on suitability, disclosures, misrepresentation, advertising, pricing, compensation, and supervision for products and services recommended and provided to seniors.  In addition, the agencies reviewed firm’s written supervisory procedures to determine whether firms had adequate controls to identify potential financial abuse of senior investors or individuals with diminished mental capacity.

The review found some firms required their registered representatives to ascertain their customers’ retirement status, their healthcare needs and whether there the client had provided another person with a power of attorney.  FINRA and the SEC also found that some firms had established product-specific suitability guidelines for senior investors purchasing products such as variable annuities, equity-indexed annuities, REITs and other high-yield alternative products.

While these are positive developments, senior abuse still happens much too frequently.  The attorneys at Gana LLP are experienced in handling claims involving the senior abuse.  Our attorneys can help you detect and uncover suspicious activity in your accounts.  Our consultations are free of charge and the firm is only compensated if you recover.