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Jun 2, 2015 by |

FINRA and SEC Issue Report on Protecting Elder Clients


The Financial Industry Regulatory Authority and the Securities and Exchange Commission recently published a report regarding senior investors. The report sets forth new recommendations for firms that prepare and institute new policies for seniors. FINRA and the SEC “are concerned that some broker-dealers may be recommending riskier and possibly unsuitable securities to senior investors looking for higher returns and may be failing to adequately disclose the terms and risks of the securities they recommend.”

San Mateo County financial elder abuse attorneys say that investment firms should read the joint report, and follow the list of recommendations. The list of recommendations includes:

1. Disclose compensation — and use plain English. This includes disclosures on the website, as well as providing clients with a comprehensive disclosure form.

2. Centralize & automate supervision and compliance. Automated systems and tools, as well as a centralized supervisory review group, should be used to approve transactions and new accounts.
3. Clarify suitability for seniors. Guidelines and procedures should be instituted regarding specific risks for senior investors.
4. Assess product concentration. Establish strict firm-wide product concentration guidelines for senior investors.
5. Log conversations. Conversations with elder clients should be documented in some type of computer system.
6. Document investment profiles. Representatives should consider and document all crucial investment policy information.
7. Have a sales policy. Develop policies around your firm’s treatment of seniors, especially around sales of alternatives, REITs and options.
8. Get signed confirmation of disclosures. Requires seniors to sign a disclosure.
9. ID & flag seniors’ complaints. “Senior-related” customer complaints should be tracked and coded.
10. Match life changes to investment profiles. Investment profiles should accurately reflect changes in clients’ personal and financial circumstances, and automated tools should be developed to streamline this process.
11. Monitor mental capacity and elder abuse. Establish firm policies regarding how firms should deal with clients with diminishing mental capacities or suspected incidents of elder abuse, in compliance with FINRA’s regulatory notice 07-43.
12. Train advisors on diminished mental capacity. Advisors should know how to identify and assist clients with diminished capacity. Continuing education regarding stages of mental capacity diminishment and tools that advisors can use to address diminished capacity should be required.
13. Talk about tax impact of variable annuities. Require an explanation of the tax ramifications and alternative investment possibilities for all customers who purchase a variable annuity in an IRA.
14. Watch for seminar behavior. Distribute evaluation forms to clients who attend seminars soliciting feedback that supervisors can review later to identify any practices that might violate FINRA rules.
15. Bar (or regulate) senior designations. Some representatives may use a “specialist” title in serving senior clients, but this is often little more than a marketing tool and does not reflect any special extensive training. The use of these senior designations should be prohibited, or regulated.

Although this list is currently merely recommended and not required, San Mateo County financial elder abuse attorneys say these practices could go a long way in preventing cases of financial elder abuse.

Evans Law Firm, Inc. handles elder abuse lawsuits, including financial elder abuse cases. If you have a financial elder abuse claim, please contact Evans Law Firm, Inc. at 415-441-8669 or via email at

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