Regulators target fraud against older investors
WASHINGTON - US regulators, stepping up efforts to rein in securities fraud involving seniors, found that more than a third of "free lunch" seminars aimed at older Americans focused on unsuitable or fraudulent investments.
The Securities and Exchange Commission, the Financial Industry Regulatory Authority and state regulators said in a report released yesterday 50 percent of the 110 securities firms investigated made exaggerated claims at the meetings, including promises of adding $100,000 to participants' net worth.
Twenty-three percent of the firms offered inappropriate advice, and 13 percent may have committed fraud, the regulators said.
"The stakes for our investor-protection mission couldn't be higher," SEC chairman Christopher Cox said yesterday at a meeting of federal and state regulators to discuss ways to protect the elderly from fraud. "If we fail, millions of more seniors will be at risk of falling victim to scam artists."
Regulators are cracking down on firms that lure retirees with misleading tactics, such as overstating their employees' expertise in retirement planning. The SEC brought more than 40 cases in the past two years involving attempts to swindle seniors.
US households run by someone aged 50 or older control more than 75 percent of the nation's wealth, making them prime targets for fraud.
Last week, the SEC sued 26 people and companies on charges they duped retirees into investing in timeshares in Cancun, Mexico. In the alleged $428 million scam, the timeshare operators used money from new clients to make purported rental payments to earlier investors, the SEC said.
Securities firms hold free-lunch seminars at hotels, retirement communities, and golf courses, and 78 percent of seniors have been invited to one, according to Washington-based Finra, the brokerage regulator formed through this year's merger of the NASD and the New York Stock Exchange's enforcement unit.
The regulators' recommendations include encouraging securities firms to step up oversight of free-lunch seminars and educating older Americans about what can happen at the meetings.
Fraudulent practices found in the seminar study included sale of phony investments, misrepresentation of potential returns, and liquidation of customers' accounts without authorization.
