A List of the Most Common Elder Investor Scams
FINRA has recently placed greater scrutiny on the subject of elder investor fraud, as indicated by the 2017 Regulatory and Examination Priorities Letter. As part of the increased actions targeting the fraud, FINRA stated that it was particularly focus on the suitability of speculative and complex products and microcap (or “penny”) stocks. Victims of elder financial fraud by financial advisors may be able to recover their losses through FINRA or securities arbitrations.
While FINRA’s focus on penny/microcap stock is a positive move, as is its focus on the subject of elder abuse in general, there are other investment products, scams and programs that target elder investors. Low interest rates have led to many schemes involving high yield and other income-producing investments. The SEC compiled a list of common elder investor scams. The following are a few in the list:
High Pressure Sales and Free Meal Seminars
Here, the fraudster often lures an elderly investor to attend a sales seminar. The lure is in the form of a free lunch, dinner or other token. These seminars sometimes are held at fancy hotels and restaurants. A meal, again, is almost always promised. According to the SEC, while these seminars are not automatically improper, sometimes they are used to pitch unsuitable products using high pressure sales tactics. Investors should remain skeptical of any high pressure tactics and should not be convinced to make an investment decision on the spot. Investors should always take time away from the sales seminar to make an objective investment decision and to seek out advice from family, friends or a trusted advisor.
Pump and Dump Scheme
This is a scheme that often features a microcap or penny stock, as mentioned above. In this scheme, a fraudster drives up the price of the microcap stock using false and misleading statements and then sells his or her stock at the peak. Once the fraudster quits touting the stock, the price typically plummets, leaving investors with worthless or near worthless securities. Elder investors should remain particularly wary of stocks or securities priced below $5.00 or that does not trade on a registered securities exchange. Similarly, elderly investors should be skeptical of any farfetched or “too good to be true” stories coming from salespersons that are not registered brokers or investment advisors and should seek objective third party advice.
Investment Advisor Services
An investment advisor is a person or company responsible for making investments on behalf of investors. The advisor may also provide advice. An investment advisor has a duty to serve the best interests of his or her customer. Sometime, as our firm has seen on countless occasions, an investment advisor will take advantage of his or her position of trust to use unauthorized and deceptive methods to generate greater commissions for the advisor. Sometimes these advisors might flat out steal the money.
Variable annuities are tax-deferred investments that typically place mutual funds inside of an insurance wrapper for tax-deferred potential investment growth. While these products are legitimate investments, the SEC and FINRA are concerned about their popularity in the sales community. Commissions to promoters and sellers of these products are very high, which provides sellers an incentive to sell these variable annuities. Variable annuities are suitable for a very small percentage of the investing public and generally unsuitable for most seniors. The penalties for early withdrawals also make variable annuities unsuitable for short-term investors. According to the SEC, elder investors should be wary of any broker who wants to sell you a variable annuity to hold inside a 401(k) or IRA. Individuals already get tax-deferred growth in an IRA or 401(k) and the variable annuity simply adds a layer of cost with no additional benefit.
“High Return” or “Risk Free” Investments
This type of scheme features a fraudster who will tout unrealistic returns that can be realized with very low risk or no risk at all. The truth of the matter is that no investment is risk-free, and sometimes the “risk-free” investments touted by these fraudsters don’t even exist – they are merely scams. Investors should be wary of opportunities that promise spectacular profits or “guaranteed” returns. While cliché, the adage rings true: If the deal sounds too good to be true, then it probably is.
Charitable Gift Annuities
According to the SEC, this type of scheme features a fraudster that poses as a charitable organization offering monthly annuity payments in exchange for payments which purportedly will be invested to both pay an annuity to the investor and to benefit charitable organizations. What the investor does not see is that a large chunk of the money is not being invested for charitable purposes, but goes directly into the fraudster’s wallet. The charity is merely front to the scheme.
When investing in a charitable annuity, investors should check that the salesperson is representing a legitimate charitable organization and that the organization knows about the salesperson’s activities.
Contact Our Firm if You or a Loved One Has Been a Victim of Elder Investment Fraud
Silver Law Group has represented and is currently representing elder investors who have lost much of their life savings due to Wall Street greed and disregard of elder abuse and exploitation laws. If you or a loved one has lost money investing due to violation of elder abuse and exploitation laws, you may be able to recover some or all of your losses.
Silver Law Group represents the interests of investors and senior investors who have been the victims of investment fraud. If you have questions about your legal rights, please contact Scott Silver of the Silver Law Group for a free consultation at email@example.com or toll free at (800) 975-4345.
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