Federal and state securities regulators will expand their crackdown on misleading investment seminars for senior citizens as part of an effort to protect them from fraud, the head of the Securities and Exchange Commission said this week.
The SEC and state regulators announced Monday a joint program designed to protect seniors against fraud.
SEC Chairman Christopher Cox said in a speech Tuesday that special inspections of brokerages and promoters offering sales seminars for seniors, now being conducted by the SEC and Florida regulators, will be expanded to other areas of the country. He did not specify the areas.
“There’s surely a place in hell for those who prey on the greatest generation,” Cox told a gathering of the North American Securities Administrators Association, the organization representing state regulators.
He also said that the SEC will convene a “senior summit” this summer.
People 60 and older make up 15 percent of the country’s population but account for an estimated 30 percent of fraud victims. With baby boomers swelling the ranks of retirees, regulators expect an increase in financial scammers preying on them.
Cox told reporters after the speech that he has had personal experience with seniors being financially targeted.
Before his mother died last year, he said, “She was hit upon relentlessly” by mortgage brokers who wanted her to refinance her home loan. Cox said he had to intervene to stop their pestering of her.
Retirement planning seminars that are being used to sell annuities, are also being investigated by legal professionals. These “free” lunches or dinners can turn out to be very costly.
Unbeknownst to the consumer, annuities have high fees if they are cancelled any time in the first 5-10 years. Also, since annuities often earn less than a C.D., they are usually not a good investment for retirement planning.
In some cases, a bonus is promised to someone who already has an annuity to entice them to switch. While the salesperson receives a large commission for the switch, they are generally not in the best interest of the consumer. In many cases, consumers did not receive the promised annuity bonus and the annuity offered little return. Consumers also suffered investment losses, surrender penalties and income tax losses from their previous investments.
Annuities are long term products, but they are being sold without disclosing the losses that will occur if they are not held for 10 to 15 years. Because they are long term, they are usually not a reasonable investment for retired people.
A consumer fraud federal class action lawsuit was recently filed against Minneapolis-based Allianz Life Insurance Company of North America. The complaint alleges that the financial services company violated Minnesota’s consumer protection laws by enticing prospective and existing life insurance policyholders to purchase its Master Dex 10 Annuity, 10 percent Bonus PowerDex Elite Annuity, and the Bonus Dex Elite Annuity through false advertising.