(SUSAN WALSH/ASSOCIATED PRESS/FILE 2007)
MICHELLE SINGLETARY | THE COLOR OF MONEY
At free-lunch seminars, it's the crooks who feast - on your money
(SUSAN WALSH/ASSOCIATED PRESS/FILE 2007)
My children know they will receive a harsher punishment for a lie used to cover up a misdeed than for the offense itself.
This should also be the rule for those increasingly popular so-called educational investment seminars and workshops.
If these gatherings - often with a free lunch or dinner included - promise you won't get pitched a product but then the organizers try to sell you something, this should be grounds for double trouble. They should be punished by losing any chance of doing business with you.
In an examination of 110 investment seminars - many of which had promised participants that nothing would be sold - 100 percent were sales presentations, according to a joint report by the Securities and Exchange Commission, Financial Industry Regulatory Authority, and North American Securities Administrators Association.
The report is yet another reminder that you can never lose sight of the fact that the sponsors of these seminars are feeding you for one purpose: to get you to buy something.
The regulators said they found everything from misleading or exaggerated claims to outright fraud. More than a third of the seminars offered unsuitable investment recommendations.
"The SEC and our fellow regulators intend to put a stop to this," SEC chairman Christopher Cox said recently. "We will sanction crooks who try to feast on the life savings of older investors."
That's a bold proclamation. I just wish it were so easy.
The regulators are fighting people who are like cockroaches. Stamp out one, and others appear. Regulators found possible fraudulent practices in 13 percent of the seminars studied. Here are just a few examples of some of the misleading claims:
Here's another rule: If someone tells you he has a high-return investment with no or low risk, it's a lowdown dirty lie. With a higher return, there is always higher risk.
"There's no such thing as a free lunch," the North American Securities Administrators' president, Joseph Borg, said. "Only the lowest of the low intentionally seek to deprive retirees of the savings they have worked so hard for so many years to accumulate."
The report details a lot of the lowly tricks used in these seminars. In one case, an investment adviser scheduled one-on-one meetings with interested individuals on the pretext of preparing a financial plan for them. Then the adviser convinced seniors to sign several blank authorization forms. He claimed he needed the forms to obtain additional financial information. Instead, he used the forms to liquidate the clients' existing portfolios and purchase equity-indexed annuities. These annuities are very complex, and their high fees and hefty multiyear surrender charges make them unsuitable for many seniors.
One broker-dealer hired an elderly gentleman to attend seminars. He would tell folks he was a current customer but did not disclose that he was paid to provide the testimonial.
Guess the percentage of seminars where regulators found no problems - only 4 percent of those examined.
That leaves you with pretty poor odds. Buy your own meal. It's cheaper.
Michelle Singletary is a columnist for The Washington Post. She can be reached at singletarym@washpost.com.
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