Wall Street Will Only Go So Far to Help Older Investors

State securities regulators unveiled a plan at their annual meeting last week that zeroed in on the role stockbrokers can play in sounding the alarm that a senior is at risk of being ripped off.

The securities industry and its regulators have been tripping over themselves trying to make things safer for elderly investors. But the new proposal by The North American Securities Administrators Association (NASAA) may have gone too far for Wall Street’s liking.

Stockbrokers say they would like to be able to tell authorities when they suspect that an elderly client is at risk of financial exploitation. So NASAA and others have been working on laws and regulations that would allow brokers to report their suspicions without violating privacy laws. Various proposals also have allowed brokers to decline to execute a transaction for 10 days if they suspect something fishy is going on.

The NASAA proposal would make it mandatory for brokers to report their suspicions. But it’s likely that the industry won’t go for that idea, preferring instead to have the option of looking the other way when they suspect financial abuse.

You can read my story for TheStreet here.

Unfazed by Finra Charges, Seniors Still Swoon for David Lerner Pitch

Elderly investors are looking for yield. And elderly investors are suckers for a free meal. Put the two together and you’ve got a recipe for packing the grand ballroom of a Marriott hotel with 300 sixty- and seventy-somethings who are prime targets for a brokerage firm looking to peddle illiquid investments.

David Lerner Associates, a Syosset, N.Y.-based brokerage firm whose founder was barred from the securities business for a year in 2012, is still out there wooing seniors to break bread at a local hotel and hear the pitch for its investments.

I went to one of those dinners at a Marriott hotel in Trumbull, Conn. in June, and wrote about it in my column tonight for TheStreet Foundation. Prominent in the pitch that night was the firm’s non-traded real-estate investment trust, a highly illiquid investment that I sure wouldn’t want my elderly mom to buy.

What’s stunning is that investors trip over themselves to attend Lerner events despite the firm’s history. From my story:

Finra said in a complaint on May 27, 2011 that Lerner and his firm targeted many “unsophisticated and elderly” clients to sell illiquid non-traded real-estate investment trusts that were concentrated in the hotel industry. The firm used misleading marketing techniques to sell the REITs, Finra said. In the months after the complaint, Finra said Lerner sent letters to 50,000 customers in an attempt to “counter negative press.” And even those letters had “exaggerated, false or misleading statements,” according to an amended Finra complaint on Dec. 13, 2011. The $14 million in fines and restitution against the firm was Finra’s largest monetary sanction of 2012, said Michelle Ong, a Finra spokeswoman.

You can read the story here.

One in Five Senior Citizens Fall for Financial Scams

As many times as I’ve run across stories about financial ripoffs of the elderly, I still can’t help but be shocked at the cruelty it takes to fleece people who are so fragile. In my article yesterday for TheStreet.com, I wrote about how much worse the problem has become, and how it will only get worse from here.

While elder financial abuse is in some respects nothing new in the annals of fraud, the aging of the baby boom generation and Americans’ increasing longevity are coming together in a perfect storm that could cause the problem to skyrocket. A 2010 survey by the Metropolitan Life Foundation estimated that victims of elder financial abuse lost at least $2.9 billion in 2010, up 12% from 2008.

I begin with a story about 73-year-old Charles S. Bacino, who lay dying in a hospital bed in 2012 when the man he called his “financial affairs manager” came by to visit and persuaded him to invest $82,000 in a cocoa and banana plantation in Ecuador. Mr. Bacino, who was hooked up to a morphine drip to soothe the pain of his pancreatic cancer, gave his keys to the man so that he could fetch his checkbook. Less than a month later, Mr. Bacino was dead and the whereabouts of his money was a mystery.

You can read the full article here.