Senior Retirees Are Targets Of Fraud

Investment seminar pitches bristle in areas with large populations of retirees, and regulators are warning seniors to be leery. A probe of the meetings has uncovered high-pressure sales pitches for undesirable products, misleading claims and even outright fraud, federal, state and securities-industry regulators said recently at a "seniors summit" on investment fraud. The Securities and Exchange Commission found abusive sales practices with the North American Securities Administrators Association, which represents state securities regulators. This is a report from AARP, the advocacy group for seniors and the Financial Industry Regulatory Authority, the securities industry's self-policing organization.

The investigation conducted by the SEC, state regulators and the Financial Industry Regulatory Authority found the use of scare tactics to get seniors to question their current investments. This is often accompanied by claims of fantastic returns with no risk, and "shills" in the audience who would stand up and offer testimonials of how much they had earned.

By law, the sales pitches made at the seminars and the materials provided to participants must be approved by a brokerage or investment company's supervisors and submitted for review by the Financial Industry Regulatory Authority. The investigation, which ran from April 2006 to June 2007, was conducted in seven states with large numbers of retirees including Alabama, Arizona, California, Florida, North Carolina, South Carolina and Texas. And nearly 60 percent of the 110 investment firms and branch offices examined showed evidence of weak supervision of the employees running the seminars, according to the investigation's report.

Fraud against seniors also can occur in the sale of oil and gas partnerships or phony promissory notes. People 60 and older make up 15 percent of the country's population but account for an estimated 30 percent of fraud victims. Among other things, the regulatory authority is examining whether brokers are using so-called "professional" designations to mislead and defraud senior investors.