Elder Financial Fraud


According to FINRA’s estimates, for the next 15 years, an average of 10,000 Americans will turn 65. Roughly one out of every five American, 65 years and older, has been the victim of financial abuse and exploitation, like broker fraud. Consequently, the elderly lose up to $2.9 billion per year from financial scams. These figures are likely lower than the true figures since they only account for frauds that are reported, and seniors are less likely to report being scammed. Because most victims are retirees, they have irreplaceable assets and are not able to personally recoup their losses by working. We have one of the best teams of elder financial fraud attorneys for recovery.

Elder financial fraud comes in many forms. Alzheimer’s disease and other types of dementia that deter mental capacity make seniors increasingly vulnerable to threats of unintentional self-impoverishment, victimization and exploitation by others. A study by Stanford University psychologists with participation of FINRA and AARP, concluded that inducing strong emotions in older adults, whether positive or negative, increased their susceptibility to falsely advertised messages and fraud, making them more likely to spend or give away their money based on the emotional state they were experiencing rather than perceived credibility of the messages they are receiving. It has been noted that financial scammers often try to trigger and evoke strong emotional responses or establish an emotional connection with their elderly victims. Seniors are also often at risk of affinity fraud, where groups of senior citizens in a community are led to believe that a crooked investment or scheme is right for them. People are too polite with their brokers and blur the line between their personal lives.

Regulators and self-regulatory organizations (“SROs”) like FINRA, as well as financial advisors and firms have taken steps to protect the elderly from scams and broker fraud but there is still a long way to go. The responsibility of spotting and preventing elder financial fraud falls on professionals working in different capacities, be it investment professionals, estate planners or lawyers. Our securities and elder financial fraud lawyers work to protect the rights of elderly investors, spread awareness about legal developments, and work towards changes in elder law.

Here are some things you should know about elder financial fraud:

  • Elder investment exploitation and fraud is more common than most people realize.
  • Brokers are not your friend, they are business professionals. Seniors often get tricked by personable fraudsters.
  • Investment/broker fraud is not just outright stealing money from your account. It is recommending products that are not right for you, too complicated to understand and the failure to explain the investments accurately.
  • Investment Fraud can affect anyone, not just the extremely wealthy. It can happen to anyone with a 401k, IRA, and other investment accounts.
Financial Industry Professionals and Elder Financial Fraud

Although financial industry advisors have been aware of elder issues, regulations have not always been favorable for advisors to assist the client, so FINRA took steps towards ‘empowering advisors’ to act and prevent elder fraud. FINRA approved the Pause Law that will enable investment firms to put temporary holds on fund disbursement and securities transactions, and notify a designated trusted contact if they have reasonable belief of financial exploitation, of an elderly investor. FINRA also established a toll-free senior hotline in April 2015. The rule aims to encourage and protect advisors and brokers to act on their suspicion if they believe they are dealing with is a victim of abuse or someone making incompetent decisions due to diminished capacity.

There are also many instances when financial advisors, brokers and estate planners are not motivated to act in the best interest of their elderly client. For instance, when it comes to retirement accounts and nest eggs, although brokers are required to only recommend “suitable” investments under the existing “suitability standard”, they can push a more expensive product that pays a higher commission than a cheaper fund that would be equally appropriate for that investor. In April 2016, the Department of Labor passed tougher “fiduciary duty” rule aimed at aligning client interests with broker duties, removing conflicts of interest and reducing fees and commissions that erode retirement savings. We must hold brokers to higher standards to always put their client’s best interest first. It takes effect on April 10, 2017. It will cast a wider net on who is subject to the fiduciary standard but it may be a while before these laws actually come into effect.

Challenges with Diminished Capacity and Elder Fraud Protection

There continues to be a struggle between financial autonomy and protection for the elderly. The potential negative outcomes of financial decisions made with diminished capacity can be very destructive.

Those of us who work with the elderly regularly, need to be attuned to deciding whether our clients have the capacity to make decisions regarding their financial affairs. As securities attorneys, when we see the elderly make questionable investment decisions, it immediately raises a red-flag concerning their financial capacity and possible abuse. American Psychological Association (APA) together with the American Bar Association (ABA) developed a Handbook for Lawyers that focuses on the assessment of “civil” capacities including financial capacity that reflect the ability of an individual to manage his/her financial affairs in consistence with their self-interest.

Firms and advisors are believed to be in the best position to identify suspicious activity even before family and friends. Common signs include changing a long term strategy, frequently repeating orders or questions, taking investment actions out of the ordinary such as making major withdrawals from an IRA, and trouble processing basic information.

When the elderly find themselves victimized, there are many legal recourses available to them. Institution like FINRA, and criminal and civil statutes allow for aggressive legal action to provide protection for the elderly. However, there are many instances when elder financial fraud goes unreported because the victim might blame themselves for financial losses or feel emotionally attached or dependent on the person.

Recent Significant Elder Financial Fraud Cases
  • Currently representing trust and estates in FINRA arbitration involving churning and excessive fees in the account of a senior widow who has dementia against major financial institution

  • Currently representing estate in case of conversion and continued trading in an elderly woman’s account after her death in FINRA arbitration against major financial institution

  • Currently representing elderly widow with Parkinson’s disease and 24/7 care in a matter against major financial institution

  • Successfully represented wheelchair bound retired businessman and his wife in FINRA arbitration relating to unsuitable investments and misrepresentation in the sale of brokerage firm’s proprietary product

  • Successfully represented retired doctor in Ponzi scheme against brokerage firm

  • Successfully represented hundreds of retirees in cases involving churning, Ponzi scheme, unsuitable investments and fraud

Attorney Advertisement. Prior results do not guarantee a similar outcome.

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