Recently in Seniors Category

September 20, 2012

Brokers Behaving Badly: Elder Financial Abuse

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.

November 11, 2011

Regulators Concerned About Brokers Claiming to be "Senior Specialists"

Many investors do not realize that the terms Financial Analyst, Financial Advisor, Financial Consultant, Financial Planner, Investment Consultant or Wealth Manager are simply generic terms or job titles commonly used by stockbrokers and investment advisors. Equally as troubling are the use of titles or designations, such as "Senior Specialist," that are designed to gain the trust and confidence of elderly investors and retirees. The use of such designations is often little more than a marketing tool to attract business from the rapidly growing pool of investors who are 65 years or older.

Seniors Reserved Sign.gifRecently, our law firm filed a securities arbitration claim against a financial advisor who touted his qualification as a "Certified Senior Advisor" (CSA) and assured a group of elderly women who attended a free lunch seminar that his firm "worked exclusively with senior investors to protect their financial assets and standard of living." Based on these assurances, they believed that their financial advisor had their best interests in mind when he recommended that they invest the bulk of their assets in a risky high-yield investment.

Our clients are now seeking damages through arbitration before the Financial Industry Regulatory Authority (FINRA). The organization that granted the broker his CSA designation, cannot provide any direct assistance to these investors. Although the Society of Certified Senior Advisors (SCSA) has a mechanism for disciplining CSA designees who fail to adhere to their Code of Professional Responsibility, the SCSA's primary method of discipline is to simply revoke the financial advisor's CSA designation.

FINRA Oversight of Senior Designations

In November 2011, FINRA published a Regulatory Notice urging brokers to pay closer attention to the use of senior designations that imply an expertise or specialty in advising senior investors. According to a survey conducted by FINRA, 68% of firms allow the use of senior designations by their representatives. Of those firms that permit the use of senior designations, 66% require the approval and verification of the credentials, 23% require approval but do not verify credentials, and 11% do not require approval of the certification and do not verify the credentials.

There are a variety of senior designations in use by brokers including: Certified Senior Advisor (CSA), Certified Senior Consultant (CSC), Chartered Senior Financial Planner (CSFP), Chartered Advisor for Senior Living (CASL), Certified Retirement Planning Counselor (CRPC), Accredited Retirement Plan Consultant (ARPC) and Certified Retirement Services Professional (CRSP). FINRA is most concerned with those titles that have little, if any, meaningful qualification standards. California law also precludes broker-dealers and investment advsiors from using senior-specific credentials in the offer or sale of securities where such credentials are non-existent or where the organization does not have reasonable standards for ensuring competency of certified individuals. According to FINRA: "[i]nvestors are unlikely to differentiate between designations that represent an enhanced level of proficiency in dealing with financial matters relevant to senior investors versus a designation that is simply a marketing tool." A brokerage firm that allows the use of any title that conveys expertise in advising for retirement or senior investors where such a specialty does not exist could be in violation of industry rules and also the anti-fraud provisions of the federal securities laws and FINRA rules.

There's No Such Thing as a Free Lunch

A common tactic used by bogus "senior specialists" is the hard to resist free-meal seminar. Elderly investors should be particularly wary of salesmen who are pushing variable or indexed annuities. It is particularly important to make sure that the sales person is properly licensed. Before investing, all investors, especially seniors, should check out a broker's disciplinary history using FINRA's BrokerCheck service.

August 12, 2010

Securities Regulators Vow to Make the Protection of Senior Investors a Top Priority

Thumbnail image for Senior Xing.jpgIf the type of cases that are coming into my securities law firm are any indication, then claims of account mismanagement and securities fraud involving senior citizens are on the rise. Without a doubt, the recent economic downturn wreaked havoc on many retirement portfolios. According to the Investment Company Institute (ICI), retirement assets in the United States fell by $4.5 trillion between the end of 2007 and the first quarter of 2009.

Because the estimated number of Americans who are 65 or older will more than double to 89 million individuals over the next 4 decades, regulators have made protecting seniors from investment fraud and abuse a top priority. In a report issued today by the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) and the North American Securities Administrators Association ("NSAA"), the three agencies outlined the steps that financial services firms should take in order to improve their policies and procedures when working with senior investors. Click here to download the joint report.

The regulators are urging financial services firms to adopt these latest practices when serving senior investors. "Best practice" guidelines alone, however, are not enough to protect millions of soon-to-be-retired baby boomers. Securities regulators will need to aggressively monitor and bring enforcement cases against financial services firms that prey upon senior investors.

Related Links:

Alcala Law Firm - Elder Financial Abuse Information
SEC - Investor Information for Seniors
NASAA - Senior Investor Resource Center

September 3, 2009

Expedited Arbitration Procedures for Senior Citizens and Seriously Ill Investors

At the University of San Francisco Law School's Investor Justice Clinic, where I am an adjunct professor and supervising attorney, I am seeing a disproportionately large number of senior citizens who are victims of securities fraud and account mismanagement. The oldest client at the clinic is in her 90's. Elderly clients and those who are seriously ill have unique needs that require swift justice.

The typical securities arbitration claim filed with the Financial Industry Regulatory Authority (FINRA) takes about 1.25 years to complete. Fortunately, investors who are 65 years or older or seriously ill can request an expedited hearing under a program that was established in June 2004. So far, 701 customers have participated in FINRA's expedited program and, according to FINRA, their cases have been resolved 31% sooner.

For eligible cases, FINRA assures investors that its staff will administer the hearing in an expeditious manner. This program is not specifically covered in the arbitration rules; however, FINRA has amended the Arbitrator's Reference Guide to remind the arbitrators that they should avoid unnecessary postponements or do anything to delay the proceedings. In my experience, the program has been helpful but the expedited procedures should be included in the arbitration code. As it now stands, the burden rests on the investor's attorney to insist on getting the earliest possible hearing dates while allowing enough time to adequately prepare the case.

June 24, 2009

Securities Fraud Victims Get Free Legal Assistance from University of San Francisco Law Students

Small investors and seniors who are unable to afford a securities lawyer and have suffered investment losses due to account mismanagement or securities fraud may qualify for free legal assistance from the Investor Justice Clinic, a law clinic operated by the University of San Francisco School of Law in San Francisco, California. I am proud to be working with the students and clients at the Investor Justice Clinic as a supervising attorney and adjunct professor at the university. The Clinic is a valuable resource for small investors that cannot find a securities lawyer willing to take their case on either an hourly or contingent fee basis.

Securities claims against stockbrokers are typically resolved through arbitration before the Financial Industry Regulatory Authority (FINRA). Law students at the Investor Justice Clinic help investors prepare and submit securities arbitration claims. The students are supervised by law professors, securities lawyers and experts in the field of securities.

To qualify for the Clinic's free legal services, the investor must have suffered damages that are less than $35,000 and have a household income under $50,000. However, these requirements may be waived under special circumstances. The Clinic's clients are typically located in the western half of the United States, but this is not a requirement.

Recently, the Investor Justice Clinic was featured in a MSNBC news segment.

January 26, 2009

Elder Financial Abuse

As the wealthiest segment of our population ages, instances of elder financial abuse will be on the rise. Whenever elder financial abuse is suspected, it should be immediately reported. What is elder financial abuse? Elder financial abuse is broadly defined as the theft or taking of money or property from an elder or senior citizen.

In 2009, California amended its Elder Abuse laws to include the taking money from an elder through the use of undue influence. Elder abusers can also include those who help or assist in the financial abuse of an elder.

What should you do if you suspect elder abuse?

Members of the public are encouraged to report instances of elder abuse to local law enforcement or adult protective services. If a financial institution reasonably suspects that there has been elder financial abuse, they are required by law to report the abuse. Victims of financial abuse can also take legal action against the abuser and anyone that has assisted them. Warning signs of elder financial abuse:

  • The elder person develops a new close relationship with someone who offers to manage their finances and assets.
  • Family members or caregivers isolate the elder and restrict the person's contact with others and closely regulate/monitor the elder's visitors.
  • The elder is confused, forgetful, frightened, withdrawn or secretive.
  • The appearance of suspicious spending patterns, withdrawals or financial activity in the elder's bank or brokerage accounts.
  • The elder has made an investment that they do not understand or that appears inappropriate, particularly investments that charge high fees/commissions or impose early withdrawal penalties.
  • Signatures on checks or forms do not resemble the elder's or the information on the form is incorrect.
Fiduciaries such as investment advisors, trustees or conservators should be wary of any family member, caregiver or newcomer who has taken a sudden interest in an elderly person's financial affairs. Obvious red flags include the following: (1) sudden changes to an elderly person's estate plan; (2) a newly created power of attorney for a bank or brokerage account; or (3) the appointment of a co-trustee for a bank or brokerage account.

Immediately report any instance of elder abuse to Adult Protective Services or the police department. Many states make it mandatory for financial institutions to report suspected financial elder abuse. Remember, anyone who assists in the financial abuse of an elder, may also be liable.

Click here for related blog posts about senior investors.