Finra zeroing in on practices involved in sales to seniors

By Mark Schoeff Jr.

Apr 14, 2013 @ 8:31 am (Updated 9:02 am) EST

The Financial Industry Regulatory Authority Inc. is gathering data from firms regarding the products they market to seniors, the percentage of revenue they derive from those sales and the designations they are using to market themselves to older Americans.

“It has all of our attention, and it's somewhere where you'll see regulators continue to focus,” Susan Axelrod, Finra's executive vice president for member regulation sales practices, said last Tuesday during a compliance conference at the Securities and Exchange Commission.


Seniors are especially vulnerable to offers of yield-chasing and high-risk products, Finra chief executive Richard G. Ketchum said.

“These are people who have been particularly impacted by reductions in interest rates because the cash coming from their investments often is a significant supplement to whatever 401(k), pensions and Social Security they have,” he said.

Participating in a panel at the event, Mercer Bullard, president of Fund Democracy Inc. and professor of law at the University of Mississippi, said that the United States is on the verge of a “senior crisis” posed by the risk of seniors' outliving their assets and their declining ability to manage their money.

“What we're looking at is a massive increase in senior misery,” Mr. Bullard told the audience.


The increasing sophistication of financial products, combined with longer life expectancy, is creating an environment in which fraud can thrive, according to Mr. Bullard.

“There's probably someday going to be a good argument that anyone over 75 shouldn't be sold anything that is outside of a predetermined list of fairly simple funds, meaning low volatility and low risk,” he said in an interview. “Otherwise, we're going to see millions of seniors living on Social Security who are not expecting that to be their standard of living.”