FINRA Releases Report on its Securities Helpline for Seniors

Highlights Lessons for Investors, Effective Senior Protection Practices
for Firms, and Instances of the Helpline Flagging and Preventing Fraud

WASHINGTON–(BUSINESS WIRE)–The Financial Industry Regulatory Authority (FINRA) today released a year-end
report
on the FINRA Securities Helpline
for Seniors 1-844-57-HELPS (1-844-574-3577), which has fielded more than
2,500 calls and helped investors recover nearly $750,000 in voluntary
reimbursements from firms since its launch in April. The report
highlights important lessons for investors gleaned from calls and lays
out effective practices for firms to consider when working with senior
investors.

The report notes that seniors, who can be especially vulnerable, are
frequent targets for fraud. This is a growing concern as the number of
people 85 years and older is projected to increase more than 50 percent
between 2012 and 2030. Moreover, cognitive impairment affects more than
20 percent of adults over the age of 70; and in 2014, retirement assets
of those aged 65-74 were estimated at $3.5 trillion, making that
population an inviting target for scammers.

Susan Axelrod, FINRA Executive Vice President, Regulatory Operations,
said, “FINRA created the Helpline to provide assistance to senior
investors for concerns they have with their brokerage accounts and
investments, and I am incredibly pleased with the positive impact it has
had in just a few short months. The Helpline has also served as a
tremendous source of information as we actively engage with seniors,
learn of and respond to issues they are experiencing, and use this
real-time intelligence to inform our regulatory programs and provide
effective practices to firms.”

Calls to the Helpline allowed FINRA to identify several emerging scams,
including fraud centering on taxes,
bogus
lottery winnings
and binary
options
, all of which were flagged by FINRA and resulted in investor
alerts. Additionally, helpful
tips
on using BrokerCheck
(FINRA’s online tool) before investing and guidance on how to navigate
the transfer
of an account after the death
of a family member were frequent
points of discussion with investors seeking help.

The report highlights several cases where investors calling the Helpline
were assisted either before becoming the victim of fraud or in
recovering funds after they were scammed. These cases include:

  • The son of a potential victim called the Helpline because he was
    concerned about a person soliciting an investment from his elderly
    father. Helpline staff assisted the caller in performing a BrokerCheck
    search of the person and found that FINRA had barred him from
    association with any FINRA member firm. With this information, the son
    stopped his father from making a bogus $110,000 investment.
  • An elderly investor’s accountant called the Helpline after finding a
    suspicious document among his 86-year-old client’s tax receipts. FINRA
    launched an investigation and discovered the client’s broker had
    borrowed $220,000 in 2012 and was repaying her $1,200 every month.
    FINRA notified the broker’s firm and within 10 days the firm
    terminated him. Separately, FINRA barred the broker from association
    with any FINRA member firm for his failure to cooperate with its
    investigation of his activities. The firm, previously unaware of the
    loan, made the client whole on the remaining balance owed and included
    a nominal interest amount.
  • An anonymous tipster called the Helpline with allegations that a
    broker was using his influence to be named executor and primary
    beneficiary of an elderly client’s $3 million estate. Based on the
    tip, FINRA immediately launched an investigation and found the broker
    had not only violated his firm’s internal procedures by failing to
    disclose his role as executor of his client’s estate, but also
    falsified firm records to conceal his activities. FINRA took formal
    disciplinary action against the broker. Separately, the rightful heirs
    of the estate recovered a majority of estate assets through a civil
    court action.

Importantly, the report outlines several effective practices firms
should consider implementing to protect seniors. Many of these practices
focus on strong policies and supervisory procedures that, for example,
prevent brokers from borrowing from clients. The report singles out the
strong policies and programs of one firm that is especially effective in
protecting vulnerable investors, including:

  • adopting mandatory annual training for all employees to help them
    recognize elder abuse and steps to take when abuse is suspected;
  • establishing a specialized, centralized unit that coordinates the
    firm’s responses and client defense strategies for complex senior
    issues and serves in an advisory capacity across the firm for
    registered representatives who have concerns and questions about
    senior issues;
  • publishing and distributing client-focused educational materials to
    help investors protect themselves from possible scams;
  • hosting symposiums across the country with experts addressing issues
    that impact older Americans; and
  • joining industry groups focused on combating elder abuse, which has
    increased the firms’ protections through information sharing among
    industry peers.

The report states that firms should consider their size, retail client
profile, product offerings, complaints or concerns raised by senior
clients, the training of its workforce, and other factors in determining
how to design and implement programs and controls to best serve this
segment of the investing public.

Investors can obtain more information about, and the disciplinary record
of, any FINRA-registered broker or brokerage firm by using FINRA’s
BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2014,
members of the public used this service to conduct 18.9 million reviews
of broker or firm records. Investors can access BrokerCheck at www.brokercheck.finra.org
or by calling (800) 289-9999. Investors may find copies of disciplinary
actions as well as other disciplinary documents in FINRA’s Disciplinary
Actions Online database. Investors can also call FINRA’s
Securities Helpline for Seniors
at (844) 57-HELPS for
assistance or to raise concerns about issues they have with their
brokerage accounts and investments.

FINRA, the Financial Industry Regulatory Authority, is the largest
independent regulator for securities firms doing business in the United
States. FINRA is dedicated to investor protection and market integrity
through effective and efficient regulation and complementary compliance
and technology-based services. FINRA touches virtually every aspect of
the securities business – from registering and educating industry
participants to examining securities firms, writing rules, enforcing
those rules and the federal securities laws, and informing and educating
the investing public. In addition, FINRA provides surveillance and other
regulatory services for equities and options markets, as well as trade
reporting and other industry utilities. FINRA also administers the
largest dispute resolution forum for investors and firms. For more
information, please visit www.finra.org.

Contacts

Financial Industry Regulatory Authority (FINRA)
Michelle
Ong
, 202-728-8464
or
Nancy
Condon
, 202-728-8379