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.