SEC Enforcement Director Highlights Agency’s Efforts To Eliminate Fraud Targeting Senior Investors

The Securities and Exchange Commission says that it has brought about over 45 enforcement actions involving scams targeting senior investors in the past two years. At the ALI-ABA Life Insurance Company Products Conference earlier this month, SEC Enforcement Director Linda Thomsen talked about the agency’s efforts to fight fraud against the elderly. She expressed concern over the fact that there are so many investment schemes out there focused on defrauding the elderly.

Thomsen said that the SEC has targeted a number of cases involving supervisory deficiencies. In one case, a Georgia broker convinced the Fulton County Sheriff’s Office that it was investing with a MetLife affiliate, when, in fact, the affiliate was actually affiliated to the broker.

Thomsen says MetLife knew their broker had compliance issues yet failed to supervise him properly and let him work in a “detached location.” The broker also convinced the sheriff’s office that an investment was permissible when it was not.

Variable insurance products sometimes sold by representatives primarily in the insurance sales business also raised red flags for the SEC. Thomsen raised concerns that these representatives may not be committed to obeying federal securities laws.

Sales practices and suitability issues were among other concerns that Thomsen cited for making variable insurance products an area with opportunities for defrauding investors. She cited the high level of exchange activity involving complex variable insurance products and the high commission payouts that representatives received for the sales.

Many “free lunches” for seniors are actually “hard sell” sessions that, once again, create opportunities for the sale of variable insurance products. Thomsen also mentioned conflicts of interest involving fiduciaries as a common problem.

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Related Web Resources:

Remarks Before the 2007 ALI-ABA Life Insurance Company Products Conference, SEC.gov, November 8, 2007
For Seniors, SEC.gov