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Elderly Are Easy Victims When It Comes to Investment Fraud

Seniors are often an easy target for investment fraud – so much so that the Financial Industry Regulatory Authority (FINRA) is warning some broker/dealers about the use of designations that may imply special expertise in working with elderly investors.

In a regulatory notice issued earlier this month, FINRA reminded firms of their supervisory obligations regarding how they use certifications or designations that imply expertise, training or specialty in advising senior investors. The notice also outlines findings from a survey FINRA conducted with broker/dealers and their use of senior designations.

Among other things, findings from the survey showed that some supervisory procedures were not discerning enough when it came to the quality of the designations. And, in some cases, the senior designations approved by various broker/dealers did not require rigorous qualification standards.

As reported Nov. 15 by Investment News, regulators have been concerned for some time now regarding the use of senior designations, as well as the marketing practices used by many broker/dealers to sell products to elderly investors. One of those practices is the “free-lunch seminar,” which has often been used to lure people – especially the elderly – into investing in unsuitable or even fraudulent products.

According to the Securities and Exchange Commission (SEC), these types of lunches are typically held at upscale hotels, restaurants, retirement communities and golf courses. In addition to providing a free meal, the firms and individuals conducting the gatherings often use other incentives such as door prizes, free books, and vacation deals to encourage attendance. The real purpose of the meetings, however, is often to entice attendees’ to open new accounts with the sponsoring firm and, ultimately, in buy into the investment product being touted.

The most commonly discussed products at the sales seminars include private placements, variable annuities, real estate investment trusts, equity indexed annuities, mutual funds, private placements of speculative securities (such as oil and gas interests) and reverse mortgages, the SEC says.

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