Chicago-based Stoltmann Law Offices has represented scores of senior investors who’ve suffered losses from dealing with brokers who’ve sold them inappropriate investments. It’s a story we’ve seen all too often: A senior investor is “befriended” by a broker, who then sells them investments that are extremely risky and lose money. Before they know it, their nest egg is scrambled.
Regulators and consumer watchdogs have been trying to protect seniors for decades from rapacious brokers, advisors and insurance agents. The industry police are outnumbered by hundreds of thousands of salespeople selling anything from junk variable annuities to exchange-traded products that generate high commissions for the brokers while fleecing investors’ investment accounts.
Under a relatively new rule from FINRA, the securities industry regulator, older investors may garner somewhat more protection from unscrupulous advisors and brokers. It will provide a safeguard against broker-advisors from gaining entrees into their financial affairs through various vehicles. “FINRA Rule 3241 limits the ability of a broker-dealer to be named as a beneficiary, executor, trustee, or power of attorney for one of their customers,” according to The National Law Review. “Broker-dealers must provide written notice to their firm, and the firm must assess the situation and determine whether to approve or disapprove of the fiduciary relationship.”
This extra layer of protection will impede shady broker-advisors from gaining direct access to clients’ assets, many of whom may be mentally or physically impaired and not able to make sound financial decisions. Academic studies show that from 5% to 20% of older investors admit to being victims of financial exploitation.
“One indicator of the scope of the problem is that in the first six months after FINRA instituted a hotline (844-574-3577) for senior investors,” the Law Review article notes, “the line received more than 2,500 calls. These calls resulted in voluntary reimbursement of $750,000 by financial institutions due to improper acts by financial advisors.”
While this new rule will not shut down financial exploitation by advisors, it is another way financial institutions and regulators can identify bad actors, hopefully before they fleece their older clients. Government agencies from state attorneys general to securities regulators have been actively policing senior financial exploitation for years, but are often thwarted by the industry’s aggressive marketing techniques. A perennial trap has been “free” lunches, seminars and trips designed to lure in new clients. Even more marketing is conducted through the internet and robo-calling.
If you invested with a broker-advisor and lost money as a result, you may have a claim to pursue through FINRA Arbitration. Please contact Stoltmann Law Offices, P.C. at 312-332-4200 for a free, no obligation consultation with a securities attorney. Stoltmann Law Offices is a contingency fee law firm which means we do not get paid until you do!