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January 02, 2014 at 09:23 AM
In a letter sent Jan. 2, the Financial Industry Regulatory Authority (FINRA) has again highlighted treatment of senior investors by brokers and firms among its regulatory priorities for 2014.
However, FINRA may be issuing a report on firms’ practices on product-specific suitability guidelines for senior investors in the coming year or so, having noted that it has found that multiple firms have established such guidelines for seniors buying variable annuities, equity-indexed annuities, REITs and other high-yield alternative products.
“The focus on senior investors builds on work we began in 2013,” the FINRA letter stated.
Last year, in a cooperative effort, the Securities and Exchange Commission (SEC) and FINRA initiated an assessment of firms’ suitability controls, advertising, pricing and other factors with regard to policies and practices in their senior investor client base.
The assessment also reviewed firms’ written supervisory procedures to determine whether firms have in place adequate controls to identify potential financial abuse of senior investors or individuals with diminished mental capacity.
The review found that age plays a role in many firms’ supervisory processes. For example, some firms required their registered representatives to ascertain their customers’ retirement status, their future prospects for employment, their health care needs and whether there was a durable power of attorney, FINRA stated.
FINRA is keenly interested in these suitability guidelines. FINRA noted in its letter that it will shift its focus to enforcement options when it detects financial abuse, including abuse involving senior investors. FINRA specifically pointed to a fraud case where two brokers were barred from the securities industry for wrongfully converting approximately $300,000 from an elderly widow with diminished mental capacity, and for failing to fully cooperate with FINRA’s investigation.
