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FINRA CONTINUES REGULATORY FOCUS ON SENIOR INVESTORS

On September 10, FINRA  issued Notice 07-43 aimed at senior investors, demonstrating again that protecting older investors is a priority for regulators.   www.finra.org/RulesRegulation/NoticestoMembers/2007NoticestoMembers/P036815  The Notice highlights four main areas of concern: 

• unsuitable product recommendations to seniors
• use of misleading "senior" designations and credentials
• high-pressure sales tactics aimed at seniors
• red flags when dealing with persons with diminished capacity and suspected financial abuse of seniors

With respect to suitability, the Notice focuses on several products previously noted as posing suitability risks for seniors, namely deferred variable annuities, equity indexed annuities, variable life settlements, and home mortgage investments.  The Notice also highlights the need for care when using retirement savings to make high-risk investments, and cautions firms that a customer's net worth alone is not determinative of whether a particular product is suitable -- even for "accredited" investors.  

Related to FINRA's suitability focus is its emphasis on misleading sales tactics aimed at seniors, such as brokers' use of titles that convey expertise in senior issues (i.e., "senior specialist", "certified senior adviser", "retirement specialist") where such expertise does not exist.   FINRA also cautions against the use of  "free lunch" seminars aimed at seniors where high pressure sales tactics promote products that may not be suitable for all persons in attendance. 

The Notice discusses regulator examinations of broker-dealers designed to protect senior investors, and makes clear that such regulatory focus will continue and will likely increase.  This makes sense, since it is anticipated that over the next 25 years the number of folks aged 65 years and older will double.  www.census.gov/prod/2006pubs/p23-209.pdf  Firms are well served to review and, if warranted, enhance their policies and procedures,  taking into account the common issues to senior investors identified by FINRA . 

 

Full post as published by OverRegd - Securities Regulation and Litigation Blog on September 11, 2007 (boomark / email).