September 11, 2009 Comments (0) Blog, Securities Fraud

Compliance, Supervisory and other practices used by financial services firms in serving senior investors to avoid securities fraud.

(Last Updated On: July 17, 2015)

Realizing that senior investors comprise a significant portion of those individuals investing in the markets today, the Securities Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and the North American Securities Administrators Association (NASAA) view the protection of senior investors as a top priority. To that end, in February 2008, these agencies undertook a new initiative to identify and publish examples of practices that financial services firms have developed with respect to their interactions with senior investors so that the investing public (and senior investors specifically) would be aware of the measures that firms should be taking in protecting senior investors so that these investors would be able to identify whether their brokerage firm was taking the appropriate precautions. A summary of these agencies conclusions and findings regarding what steps firms should be taking to protect senior investors is as follows:

– All brokerage firms, including Morgan Stanley, Banc of America, Wells Fargo, Ameriprise, UBS, etc., should have a system in place to identify areas of the firm that need to emphasize investors’ life stage issues (i.e. determine what are appropriate investment objectives for individuals at each stage of their life);
– Brokerage firms should have established age-based restrictions on certain products or product features (i.e. certain products, like perhaps commodities or options, should not be sold to elderly investors);
– Broker dealers should have a system in place to review and approve the appropriateness of marketing materials aimed at senior investors;
– Brokerage firms should have systems in place to insure that financial advisors with senior clients increase the frequency of contact with these investors to remain informed about the changes in investors’ financial needs, employment status, health, and other life events (since senior investors financial and health circumstances can change dramatically in an instant);
– Broker dealers should have a policy in place in insure that follow-up letters to senior investors are sent after conversations to document and reiterate what was discussed;
– Brokerage firms should be training their financial advisors to avoid using sophisticated financial jargon with senior investors and to have large font versions of marketing materials available;
– Brokerage firms should be specifically training brokers on senior-specific issues, such as how to identify when the client has a diminished capacity and requires additional assistance, including potentially a power of attorney, in making investment decisions;
– Broker dealers should have training in place to educate financial advisors on how to identify elder financial abuse and securities fraud schemes specifically targeted towards senior investors;
– Brokerage firms should have specific procedures regarding obtaining detailed financial and health information from senior investors at the account opening to insure that the investment objectives are appropriate in light of the clients age, needs, and health considerations;
– Brokerage firms should also have a system in place to insure that compliance reviews of senior investors’ accounts are senior-focused, and, if necessary, conducted on a more regular basis;

For more information on the February 2008 initiative, please visit the FINRA website.

If you have questions about securities elder law, or if you believe that you have been the victim of a securities fraud, The White Law Group may be able to help. To speak to a securities attorney, please call our Chicago office at 312-238-9650 for a free consultation.

The White Law Group is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.

For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.

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