About a quarter of the enforcement actions brought by state securities regulators last year that track victims by age involved alleged scams targeting senior citizens.
In a new report, the North American Securities Administrators Association found that cases affecting the elderly included on average three senior victims per case.
Most of these cases involved sales of unregistered investments and affinity fraud, where crooks solicit money from identifiable groups like retiree communities or ethnic organizations. They often pose as a member of that group.
“The depressing fact is that virtually every case that involves multiple investors has at least some senior victims as a component,” said Joe Rotunda, director of the enforcement division at the Texas State Securities Board. “Seniors have a bulls-eye on them when it comes to fraudulent promoters.”
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In one Texas case, an elderly widow was bilked out of her fortune by a neighbor who said that the oil and gas exploration investment he sold would generate lots of money, which she could leave to her beloved church when she died. That individual, who now has been convicted and imprisoned, spent her money renovating his house and swimming pool, Mr. Rotunda said.
Advisers should take special care of their senior clients, making sure that they know how to read financial statements so they can monitor the progress of their investments and take notice when red flags pop up, he said. Also, advisers should review all of a client's holdings and assets and alert someone if something seems unsuitable, such as investments that won't pay out for a long time or something wildly speculative.
“If you see something, say something,” Mr. Rotunda said.
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About 38% of the 2,042 enforcement actions reported by 49 states were against registered investment professionals or firms, 37% were against unregistered individuals or firms and the rest targeted other entities that were involved in these cases, such as law firms.
Of the registered firms, 156 actions were against broker-dealers and 146 were against investment adviser firms, the NASAA enforcement report said.
Among the registered individuals, 230 actions were taken against people at broker-dealers and 190 were against investment adviser representatives.
Additionally, 59 actions were taken against insurance firms or individual agents, the report said.
The states also reported launching 442 investigations of those who have securities licenses, most involving books-and-records violations, unsuitability of investments and failure to supervise, the enforcement report said.
