The early response to a recently established elder financial abuse helpline suggests that exploitation of senior investors may be rampant, and appears to justify new rules issued by non-governmental financial industry regulators.
According to a report by the Chicago Tribune, the Securities Helpline for Seniors, created in 2015 by the Financial Industry Regulatory Authority (FINRA), has received more than 7,000 calls since its inception. As a result of those calls, financial firms have paid more than $2.6 million in voluntary reimbursements to investors.
The calls have involved mutual funds, real estate investment trusts, variable annuities and other investment areas. The FINRA senior financial abuse helpline has also received calls that have helped the group uncover a number of fraud schemes aimed at elderly investors, including check scams, fake lottery wins, and fake IRS claims.
The numbers come just a month after FINRA proposed new rules designed to reduce the risk of elderly financial fraud, abuse and exploitation. In late October, FINRA submitted the proposed rules to the Securities and Exchange Commission (SEC) for approval.
The elderly financial exploitation prevention rule would apply to individuals 65 years of age or older, as well as those with mental or physical impairments that makes them unable to protect their own interests. Financial institutions would be required to make a reasonable effort to get information for a “Trusted Contact” when an elderly investor is opening a new account or updating an existing one. The contact would be unable to transact business, but would be alerted in case of suspected abusive activity on the account.
In addition, the rules would allow certain qualified individuals in the firms to place a short-term, temporary hold on account disbursements when financial exploitation is suspected. Such holds would be subject to an immediate internal review and immediate notification of the account holder, as well as the trusted contact and anyone authorized to conduct business on the account.
The SEC will determine whether the proposed rule meets the requirements of the Securities Exchange Act of 1934 and may ask for changes or amendments before approval.
FINRA is a non-governmental agency that acts as a self-regulatory agency for investment firms. It was created in July 2007, as a successor to the National Association of Securities Dealers, handling all disputes between investors and stockbrokers or other financial firms. FINRA arbitrators resolve stock broker fraud claims that can include charges of breach of contract, breach of fiduciary duty, negligence, misrepresentation, unauthorized trading and other claims that investments were improperly handled.
The helpline and proposed rules came after a research report released by FINRA in March 2015 found that investment fraud cases often result in non-financial harm to clients in addition to the obvious financial problems.
According to the findings, 65% of financial fraud victims reported experiencing at least one type of non-financial cost, with half of those citing stress. Thirty-eight percent of victims reported suffering sleeping problems, and 35% reported having bouts of depression. The larger the amount of money lost to fraud, the greater the number of non-financial problems likely to be suffered by the victim, according to the report.
The victims also suffered other financial costs that were indirectly related to their losses, such as late fees, legal costs, overdraft charges and similar.
The Securities Helpline for Seniors can be reached by calling (844)574-3577.