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SEC Takes Action to Reduce Instances of Senior Fraud


New rules are intended to assist financial institutions in reducing the amount of investment fraud targeting seniors and other vulnerable investors.

Senior investment fraud. Elder fraud. Elder financial abuse. Scamming older investors. No matter what it is termed, this unfortunate activity takes place at a far greater rate – with far greater losses – than necessary. In fact, a 2011 MetLife study found that the losses of elder financial abuse victims are at least $2.9 billion annually.

Why is elder financial fraud so prevalent?

It’s simple: the elderly are easier targets. As the population ages, more individuals experience a decline in mental capacity, although sometimes it is difficult to detect. Many are hesitant to even report being taken advantage of out of embarrassment for being duped, fear of losing their freedom to make their own decisions, or worse, fear of implicating someone close to them for taking advantage of their financial situation.

What is the SEC doing to curb senior investment fraud?

Since financial advisors and brokers are on the front lines when it comes to monitoring elder finances and detecting elder financial abuse, the SEC acted in February 2017 to help financial institutions identify when an elderly or vulnerable client may be at risk. The SEC now requires that brokerage firms make reasonable effort to identify a “trusted contact person” on an elderly or vulnerable investor’s account. This named trusted contact (typically a friend or family member) can then be contacted by the broker if there is any suspicious activity on the client’s account, or to confirm the client’s health status or mental capacity.

While clients are allowed to refuse to provide a trusted contact person, and firms are not required to update all of their elderly or vulnerable client files unless a significant change is submitted on the account, the information does allow brokers to intervene if they suspect fraud or if the client’s decision making seems impaired.

If the financial institution suspects fraudulent activity on a “specified adult” account, the SEC action also grants the institution the right to temporarily freeze disbursements from the account. Specified adults are considered those at greater risk for fraud, including people over 65 or any adults vulnerable due to mental impairment.

When a hold is placed on the account, the broker then can notify all parties in the transaction to ensure the legitimacy of the disbursement. If fraudulent activity is taking place, legal action can be taken. If there is no action taken, the hold will be lifted automatically in 15 days.

What else can elder investors do to protect themselves?

The self-regulatory agency for the brokerage industry, the Financial Industry Regulatory Agency (FINRA) helps senior investors protect themselves by providing a toll-free Securities Helpline for Seniors. This helpline provides older investors with information on their investments and brokerage accounts, including assistance reading statements and understanding transactions. The helpline number is 844-574-3577.

In addition to the helpline, FINRA also provides information regarding brokers and advisors through BrokerCheck.FINRA.org. Information provided through BrokerCheck includes broker and advisor compliance records and any disciplinary actions; it is a valuable source of information if you are considering engaging a new financial broker or advisor, or checking up on a current one.

The Silver Law Group’s attorneys are frequent lecturers at retirement communities, town meetings, pension groups, and other settings, and we discuss with those audiences proactive measures to avoid being victims of investment fraud. We would be happy to speak to your group, free of charge, about what the members of the group can do to protect themselves from investment fraud. We never charge for a consultation and are happy to talk privately with someone about his or her personal situation. Contact us today for more information.

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