NASAA forms committee to tackle elder financial abuse and growing complexity of financial products.
A panel of state securities regulators will explore problems of elder financial abuse that can arise from a combination of aging baby boomers, complex financial products and retirement nest eggs that are attractive to scammers.
The North American Securities Administrators Association on Tuesday formed a new Committee on Senior Issues and Diminished Capacity, which will be headed by Montana Deputy Securities Commissioner Lynne Egan and include 13 regulators from across the country.
State enforcement statistics compiled by NASAA show that 34% of actions since 2008 involve senior victims.
“We have serious concerns about threats to senior investors,” said Andrea Seidt, Ohio Securities Commissioner and NASAA president. “I couldn't think of a more important priority for the organization than this.”
She cited the burgeoning retiree population, which contains many members who are losing mental ability, and the quickly growing number of complex products, including alternative mutual funds, as a potentially lethal mix. Retirees may not understand what they're getting into with their life savings.
“It's certainly a dangerous situation and something to watch out for,” Ms. Seidt said.
State regulators have been hearing from broker-dealers about the challenges surrounding diminished capacity, she said. They have asked how they should address clients with declining short-term memory and other signs of diminished mental acuity.
“We hope to work with them to figure out what the best practices are out there,” Ms. Seidt said. The NASAA committee could develop a model rule over the next year.
The group also will assess the extent of elder financial abuse. Anecdotally, it's clear that retirement savings whet the appetites of fraudsters.
“People know that's where the money is,” Ms. Seidt said. “They target seniors. We want to get the data and scope out how big the issue really is.”
At the federal level, members of the Securities and Exchange Commission also are concerned about elderly investors getting ripped off.
“This issue is increasingly urgent because our nation's growing ranks of seniors and retirees are among the most vulnerable members of our society,” SEC Commissioner Luis Aguilar said at the July 10 meeting of the SEC Investor Advisory Committee. “The Commission has a lot to offer to coordinate a federal effort to address elder financial abuse. The SEC should adopt clear rules, set specific objectives, outline concrete timelines and provide periodic updates on its progress.”
Another SEC Commissioner, Daniel Gallagher Jr., said the SEC has taken its eye off elder financial abuse since the 2008 financial crisis.
“It's time for us to step up our game again,” Mr. Gallagher said at the July 10 IAC meeting.
In addition, the SEC Investor Advocate, Rick Fleming, also made the topic a priority in his first report to Congress earlier this summer.
