Brokers Behaving Badly: Elder Financial Abuse

September 20, 2012

In my securities law practice, I've encountered numerous instances of elder financial abuse. Often the abuse is caused by a family member. Other times, a financial advisor is the root cause. According to the Consumer Financial Protection Bureau, seniors lost over $2.9 billion to financial exploitation in 2010. As the percent of the population over 65 continues to grow, instances of elder financial abuse will be on the rise. Here are three examples of elder financial abuse that recently caught my eye:

RBC Capital Markets: RBC Capital Markets was fined $200,000 by FINRA and required to pay $70,000 in restitution to an elderly customer for engaging in unsuitable and excessive trading of closed-end funds ("CEFs") that were purchased at the initial public offering ("IPO"). See related blog posting regarding the unsuitability of purchasing CEFs at the IPO.

Wells Fargo Investments Inc.: Former Wells Fargo broker Alfred Chi Chen entered into a settlement barring him from acting as a stockbroker for improprieties associated with sale of reverse convertible notes to elderly and retired individuals. See related blog post: Wells Fargo Investments Fined $2 Million for Unsuitable Reverse Convertible Note Sales. Alfred Chi Chen also reportedly conducted unauthorized trades in the accounts of deceased clients.

H.D. Vest Investment Services: Former broker Charles Duane Lewis was permanently barred from acting as a broker after pleading guilty to the charges of misappropriating more than $500,000 from a customer in her late 80s using a power of attorney which allowed him to draw checks on her account.

For more information about elder financial abuse, please click here.