Committee Reflects Long-Standing Role of State and Provincial Securities Regulators to Protect Senior Investors
WASHINGTON, D.C. (August 19, 2014) – With at least a third of its members’ enforcement actions involving senior investors, the North American Securities Administrators Association (NASAA) today announced the formation of a new Board-level committee to tackle a wide range of challenges confronting senior investors, regulators and securities industry professionals.
“NASAA and its members have been in the forefront in detecting the problem of senior investor abuse and responding to it aggressively with innovative regulatory solutions, targeted enforcement, investor education and publication of best practices for serving senior investors,” said Andrea Seidt, NASAA President and Ohio Securities Commissioner.
The new Committee on Senior Issues and Diminished Capacity, chaired by Montana Deputy Securities Commissioner Lynne Egan, includes representatives from the NASAA Board of Directors and each NASAA section (Broker-Dealer, Corporation Finance, Enforcement, Investment Adviser and Investor Education) as well as Canadian securities regulators. “Advancing the interests of senior investors is a tremendously important initiative for NASAA that transcends the work of each of our sections,” Seidt said.
“We are exploring this vital area from a variety of disciplines given the scope of the issues involved,” Egan said. “The committee will examine concerns raised by broker-dealer and investment adviser firms, as well as senior advocacy groups and will recommend appropriate regulatory and industry responses to ensure proper compliance and supervisory procedures are in place to prevent the financial exploitation of seniors.”
The committee is the latest in a series of initiatives from NASAA members to protect senior investors since the launch of the Senior Investor Resource Center in 2003 and the adoption of a model rule on the use of senior-specific certifications and professional designations in 2008.
“Protecting senior investors from financial exploitation long has been a primary focus of state and provincial securities regulators,” Seidt said. “Regrettably, senior investor fraud and abuse is an ever-growing problem due to the amount of wealth seniors have accumulated throughout their careers and the steadily rising numbers of retirees.”
One-third (34 percent) of enforcement actions taken by state securities regulators since 2008 have involved senior victims among states that track victims by age, according to NASAA enforcement statistics. Of the 10,526 enforcement actions initiated by states that track victims by age between 2008 and 2013, 3,548 involved victims age 62 and older. Seidt said this amount is conservative as it does not include cases from states that do not report the age of victims and many senior victims simply do not come forward.
Four recent cases initiated by NASAA members illustrate the dangers facing senior investors.
- In August 2014, the British Columbia Securities Commission determined that an unregistered adviser, committed a $65 million fraud by illegally and fraudulently advising nearly 500 clients, many of them seniors, to sell their stocks, bonds and mutual funds and purchase high-risk exempt market securities instead. Through weekly radio infomercials targeting retired investors, the unregistered adviser drew potential clients to investment seminars and meetings, where he advised them to buy these high-risk securities. He also advised his clients to borrow against their homes to purchase these risky investments. The sales generated $5.8 million in fees and commissions for the adviser. The Commission found that at least $40 million of the $65 million invested is lost, and most of the rest remains at risk. The Commission will determine sanctions against the unregistered adviser this fall.
- A Maryland-based broker-dealer firm was ordered by the Massachusetts Securities Division in 2012 to return more than $1 million after its registered representative allegedly took advantage of an elderly widow diagnosed with Alzheimer’s disease. According to the state’s complaint, the broker drove the 83-year-old woman to local banks to withdraw more than $1 million from certificates of deposit and then invested the funds in high-commission annuities, generating more than $63,000 in commissions and preventing the woman from accessing her funds without penalty for at least a decade.
- A Minnesota licensed investment adviser was ordered by the state Commerce Commission in July 2014 to stop engaging in securities related activity and to pay a $300,000 civil penalty for defrauding investors, including many seniors, as part of a Ponzi scheme that may have seen more than $2 million of investor money spent on yacht club memberships, exotic dancers, travel and fine dining.
- A convicted felon in Montana was sentenced in June 2014 to serve 20 years in prison and was ordered to pay almost $5 million in restitution and fees for bilking more than 140 victims out of nearly $5.4 million through a massive Montana-based Ponzi scheme. Many of the scheme’s victims were seniors, according to the Montana Securities Commission, including one with advanced Parkinson’s disease and one who suffered a heart attack after the crime. Many of these seniors lost their life’s savings and had to go back to work in their 70’s.
In addition to Egan, other members of NASAA’s Committee on Senior Issues and Diminished Capacity include NASAA Board Members Judith Shaw, Maine Securities Administrator; Joseph Borg, Alabama Securities Commission Director; Melanie Senter Lubin, Maryland Securities Commissioner; and Mike Rothman, Minnesota Commission of Commerce; as well as Section leaders and representatives Patricia Struck, Wisconsin Securities Administrator; Diana Foley, Nevada Securities Administrator; Andrew Hartnett, Missouri Commissioner of Securities; Gerald Rome, Colorado Securities Commissioner; Carolyn Mendelson, Counsel, Pennsylvania Department of Banking and Securities; Diane Young-Spitzer, Deputy Director and General Counsel, Massachusetts Securities Division; Deborah Gillis, Counsel, New Brunswick Financial and Consumer Services Commission Securities Division; and Dennis Britson, Director, Regulated Industries Unit, Iowa Securities Bureau.
Seidt said NASAA will appoint an Advisory Council of experts from government, business, senior advocacy organizations, academia and medical and legal practitioners, to inform the committee’s work as it moves forward.
Separately, Seidt said NASAA’s upcoming Annual Conference, September 14-16 in Indianapolis, Indiana, will include a NASAA Forum entitled “The Growing Challenge of Protecting Investors with Diminished Capacity.” Moderated by Tanya Solov, co-chair of NASAA’s Broker-Dealer Section and Illinois Securities Director, the forum will feature medical and financial practitioners, securities regulators and senior advocates for a discussion of this complex landscape and the steps being taken by regulators and industry to ensure that clients with diminished capacity are served in a manner that protects both their privacy and investments. Distinguished panelists include: Charles Sabatino, Director of the American Bar Association’s Commission on Law and Aging; Jean Setzfand, Vice President of Financial Security, AARP; Ronald Long, Director of Regulatory Affairs and Elder Client Initiatives, Wells Fargo Advisors; Patricia Struck, Wisconsin Securities Administrator; and Dr. Robert Roush, of the Texas Consortium Geriatric Center, Huffington Center on Aging, Baylor College of Medicine.
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