Fraud alert
Seniors often vulnerable to questionable investment pitches
It's no secret that many people reach retirement with a nest egg inadequate to last the rest of their lives. Many will be looking for investments with above-average rates of return, but higher returns require assuming higher risk.
This can make seniors especially vulnerable to fraud. Studies have shown that people start losing mental capacity after 70. After 85, it is much worse. Accordingly, it is very dangerous for older investors to initiate new types of investments, and they may be especially susceptible to promises of high returns from questionable financial salespeople.
For all of these reasons, investors — especially seniors — should take advantage of the support of independent parties to help them make intelligent investment decisions. The Financial Industry Regulatory Authority, the largest independent regulator for all securities firms doing business in the U.S., can help. Its activities touch every aspect of the securities business, and it administers the largest dispute resolution forum for investors and firms.
It operates the Securities Helpline for Seniors at (844) 574-3577. The helpline informs investors on how to review their investment portfolio and account statements, and it addresses concerns about the handling of a brokerage account. FINRA's website (www.finra.org) provides several investor tools and resources, such as BrokerCheck, a research tool that provides investors valuable information about brokerage firms and individual brokers, such as recent work history, qualifications, state licenses, regulatory actions and violations and complaints.
Since the helpline was initiated in 2015, FINRA has received more than 7,000 calls from all age groups. These calls have resulted in more than $2.6 million in voluntary reimbursements from firms to callers. Calls covered products associated with variable annuities, mutual funds, real estate investment trusts and energy-sector investments.
Because of these calls, FINRA has been able to identify fraud schemes associated with taxes, bogus lottery wins, fake check scams and binary options. FINRA reports examples of these frauds on its website as investor alerts. Here are two examples: If you receive a call from the IRS, it is fraudulent. The IRS will never contact you by phone and will never ask you to wire transfer funds. FINRA points out that binary options are high risk, and too often the product offered is fraudulent.
When you initiate a complaint to FINRA on its helpline, it can result in an investigation. If FINRA discovers fraudulent activity that is not under its jurisdiction, it will report that information to the appropriate regulator or Adult Protective Services organization. FINRA has made 110 referrals to 16 APS agencies and to additional state agencies; 483 other issues have been referred to state, federal and foreign regulators.
Many of the callers to the helpline are looking for information about products they are being urged to buy. FINRA provides additional sources to callers so they can do better research before committing to buy.
Other agencies provide important information about possible fraud in financial and other products. Some of these organizations are: AARP, the Consumer Financial Protection Bureau's Office of Investor Education, the North American Securities Administrators Association's Serving our Seniors and the Securities and Exchange Commission.
Unfortunately, most scams are reported after they have already ensnared many victims. If you are uncertain about the value of a product being offered to you, or the reliability of the organization or individual selling it to you, use the resources of FINRA and other independent agencies before you buy.
If you have family members who you suspect may lose or are losing their mental capacity, do what you can to make sure that they do not make any new financial transactions without input from you or an independent organization such as FINRA.
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