Earlier this year, the SEC and FINRA released their respective annual examination priorities announcing the regulators’ intent to focus on issues relating to an aging investor population. Both regulators listed retirement investments and IRA rollovers as priorities, and FINRA, as it has in recent years, specifically identified senior investors as an area of focus (see Bass, Berry & Sims’ February 6, 2015 Alert regarding 2015 regulatory priorities). The regulators’ focus on senior investors is not surprising. According to the Social Security Administration “nearly 80 million baby boomers will file for retirement benefits over the next 20 years – an average of 10,000 per day.”1 This month, a trio of regulatory actions taken by FINRA underscores the regulators’ focus on seniors.
First, on April 15, the SEC and FINRA jointly released a National Senior Investor Initiative report after gathering data in 44 examinations focused on investors 65 and older.2 The report covers a host of topics, including: (1) Securities Purchased by Senior Investors; (2) Training; (3) Use of Senior Designations; (4) Marketing and Communications; (5) Account Documentation; (6) Suitability; (7) Disclosures; (8) Customer Complaints; and (9) Supervision. The report highlights potential regulatory focus areas such as suitability issues that arise from recommending non-traditional and higher yielding investments to senior investors to compensate for the current low interest rate environment and provides a roadmap of issues for firms to consider when implementing policies and procedures geared toward senior investors. Many firms have taken note as the regulators observed that 77% of firms examined had implemented specific training to address issues relating to senior investors.
Second, on April 20, FINRA launched the FINRA Securities Helpline for Seniors™.3 The helpline will assist seniors with understanding documentation, and answering questions about handling their accounts and FINRA resources.
Third, on April 27, FINRA announced the filing of an Expedited Complaint and Temporary Cease and Desist Orders against Avenir Financial Group, Michael Todd Clements (the Firm’s Founder, CEO and Chief Compliance Officer) and Karim Ahmed Ibrahim, a registered representative. FINRA also announced the settlement of a disciplinary proceeding barring Cesar Omar Rodriguez, another registered representative of the firm.4 The Complaint alleges fraud in the sale of promissory notes and equity interests in the firm to multiple senior investors, including a 92-year old and a 79-year old stroke victim. Rodriguez was barred for his fraud and misuse of $77,000 in investor funds, including funds obtained from several senior investors.
These events serve as reminders that issues relating to senior investors are a priority of the securities regulators. Firms should review their policies and procedures to be sure that they appropriately address issues relating to senior investors and ensure that supervisors and compliance personnel are attuned to those issues.
1 https://www.ssa.gov/open/materials/2012-og-plan.pdf
2 http://www.finra.org/sites/default/files/SEC%20National%20Senior%20Investor%20Initiative.pdf
3 http://www.finra.org/newsroom/2015/finra-launches-toll-free-finra-securities-helpline-seniors