A convicted felon in Montana was sentenced to 20 years in prison and ordered to pay almost $5 million in restitution and fees for bilking more than 140 victims out of nearly $5.4 million through a massive Ponzi scheme.
An investment advisor in Minnesota was ordered to stop engaging in securities-related activity and to pay a $300,000 civil penalty for defrauding investors as part of a Ponzi scheme that may have seen more than $2 million of investor money spent on yacht club memberships, exotic dancers, travel and fine dining.
And a Maryland-based broker-dealer firm was ordered by Massachusetts officials to return more than $1 million after one of its registered representatives allegedly took advantage of a client.
Besides being initiated by a state securities regulator, these cases have another significant common denominator: their victims were among our most vulnerable citizens: seniors.
The case brought by the Massachusetts Securities Division is particularly egregious. The victim, an 83-year-old widow diagnosed with Alzheimer’s disease, was driven by a broker to local banks to withdraw more than $1 million from certificates of deposit. The funds were then invested in high-commission annuities, generating more than $63,000 in commissions and preventing the woman from accessing her funds without penalty for at least a decade.
Recognizing that at least one-third of the enforcement actions initiated by state securities regulators involve senior investors, the North American Securities Administrators Association recently launched an initiative to tackle the issue of senior investor protection head on. NASAA’s new Committee on Senior Issues and Diminished Capacity is focusing on challenges confronting senior investors, regulators and securities industry professionals alike.
Issues revolving around diminished capacity are taking on increased urgency as our population ages. NASAA members have been hearing from investment advisers and broker-dealers about the challenges they face surrounding diminished capacity. We appreciate the need to develop guidance concerning how they should address clients with declining short-term memory and other signs of diminished mental capacity.
The committee will examine concerns raised by investment advisors and broker-dealers, as well as senior advocacy groups, and will recommend appropriate regulatory and industry responses to ensure proper compliance and supervisory procedures are in place to prevent the financial exploitation of seniors.
I am pleased that two veteran securities regulators have agreed to lead this committee. Lynne Egan, Deputy Securities Commissioner of Montana, chairs the committee and Wisconsin Securities Administrator Patty Struck serves as vice-chair.
The committee includes representatives from NASAA’s board of directors, each NASAA section (Broker-Dealer, Corporation Finance, Enforcement, Investment Adviser and Investor Education) as well as Canadian securities regulators.
Members include: Judith Shaw, Maine Securities Administrator; Joseph Borg, Alabama Securities Commission Director; Melanie Senter Lubin, Maryland Securities Commissioner; Mike Rothman, Minnesota Commission of Commerce; Diana Foley, Nevada Securities Administrator; Andrew Hartnett, Missouri Commissioner of Securities; Gerald Rome, Colorado Securities Commissioner; Carolyn Mendelson, Counsel, Pennsylvania Department of Banking and Securities; Diane Young-Spitzer, Deputy Director and General Counsel, Massachusetts Securities Division; Deborah Gillis, Counsel, New Brunswick Financial and Consumer Services Commission Securities Division; and Dennis Britson, Director, Regulated Industries Unit, Iowa Securities Bureau.
NASAA also has appointed an advisory council to help inform the committee’s work, with experts from government, business, senior advocacy organizations, academia and medical and legal practitioners.
Members of the Advisory Council include: Georgia Anetzberger, Gerontological Society of America; Marin Gibson, Securities Industry and Financial Markets Association; Nancy Heffner, Financial Services Institute; Skip Humphrey, former director of the Consumer Financial Protection Bureau Office of Older Americans and former Minnesota Attorney General; David Laibson, Harvard University; Ron Long, Wells Fargo Advisors; Brett Kandt, National Association of Prosecutor Coordinators; Naomi Karpp, Consumer Financial Protection Bureau Office of Older Americans; Daniel C. Marson, Alzheimer’s Disease Center at the University of Alabama-Birmingham; Daniel Bond, American Institute of Certified Public Accountants; Kathleen Quinn, National Adult Protective Services Association; Charles Sabatino, American Bar Association Commission on Law & Aging; Lori Schock, U.S. Securities and Exchange Commission; Jean Setzfand, AARP; Neil Simon, Investment Adviser Association; Brooke Stringer, National Association of Insurance Commissioners; and Geraldine Walsh, FINRA Foundation.
I look forward to reporting on the committee’s progress during the year ahead and I encourage industry professionals to contact the committee’s chair, vice-chair, or me, with questions or suggestions.
Together, we can take a stand to help protect those who came before us and set policies in place that will help each of us as we enter our golden years.