Elder Financial Fraud

Elder financial fraud is a growing concern, affecting seniors who are often more vulnerable to exploitation due to their reliance on financial advisors or caretakers. This type of misconduct can lead to significant financial losses, jeopardizing the retirement savings and financial security of elderly investors. Recognizing the signs of elder financial fraud and understanding your options are crucial steps in protecting yourself or your loved ones from harm. Below, we address common questions about elder financial fraud and provide guidance on how to prevent and respond to it.

• What Is Elder Financial Fraud?
• How Might My Financial Advisor Engage in Elder Financial Fraud?
• Can I Enter Into a Loan Agreement With My Financial Advisor?
• How Can You Prevent Elder Financial Fraud?
• What Are My Resources if I Think Elder Financial Fraud Has Occurred or Is Afoot?

Elder financial fraud arises when elderly investors are targeted or exploited financially due to their age, health vulnerabilities, or cognitive impairments, such as Alzheimer’s disease. Fraudsters may perceive seniors as easier targets because they are more likely to rely on financial advisors or caretakers for assistance with managing their investments. This exploitation can take many forms, including unauthorized access to accounts, pressure to make high-risk investments, or outright theft. Financial exploitation of the elderly is rampant in the securities industry, prompting regulators to implement specific rules aimed at protecting seniors from harm.

Elder financial fraud not only affects the victim’s financial stability but also their emotional well-being and often times goes unreported. Many seniors rely on their investments to support their retirement and medical needs, making any financial loss particularly devastating. Identifying elder financial fraud early is critical to preventing further damage and ensuring that victims are made whole.

Your financial advisor can engage in elder financial fraud through various forms of misconduct, including but not limited to:

• Churning: This occurs when a financial advisor excessively trades in an account to generate commissions rather than to benefit the client. For seniors, churning can deplete accounts quickly, jeopardizing their financial security.
• Unauthorized Trading: If your financial advisor makes trades without your explicit consent or approval, this constitutes unauthorized trading. Seniors, who may be less able to monitor their accounts closely, are particularly vulnerable to this type of misconduct.
• Forgery: Some advisors may forge signatures or documents to facilitate unauthorized activities, such as withdrawals or trades, without the senior’s knowledge.
• Unsuitable Recommendations: Financial advisors may recommend investments that are not in the senior’s best interest, such as high-risk or illiquid securities that do not align with their financial goals, risk tolerance, liquidity needs, or time horizon.

These actions not only violate industry regulations but also undermine the trust that seniors place in their financial advisors. If you suspect your financial advisor has engaged in any of these activities, consult with an experienced elder financial fraud attorney.

The answer is most likely no unless a narrow exception applies. FINRA Rule 3240 explicitly forbids financial advisors from entering into loan agreements with their clients unless specific conditions are met. These exceptions may include situations where the client and the advisor are family members, or if the client is a financial institution in the business of lending. Even in these circumstances, the loan must be disclosed to and approved by the broker’s or financial advisor’s firm.

If your broker or financial advisor requests to borrow funds from you or offers to lend you money, this should raise immediate red flags. Such arrangements can create conflicts of interest and are generally viewed as unethical within the securities industry. You should consult with a securities attorney or report the matter to your advisor’s compliance department or FINRA.

There are several proactive steps you can take to prevent elder financial fraud:

• Add a Trusted Contact Person: You can add a Trusted Contact Person (TCP) to your brokerage account. This individual, who may be a family member, attorney, or another trusted individual, can be contacted by your brokerage firm if there are concerns about unusual account activity or suspected fraud. This provides an additional layer of oversight and can help prevent unauthorized actions.
• Monitor Accounts Regularly: Regularly review account statements and transaction histories for any unusual or unauthorized activity. Encourage elderly investors to involve a trusted family member or advisor in reviewing their accounts.
• Educate Yourself About Scams: Familiarize yourself with common scams targeting seniors, such as phishing, fake investment opportunities, tech support scams, and high-pressure sales tactics.
• Establish Clear Communication Channels: Maintain open communication with your broker or financial advisor and ensure all instructions are provided in writing. This can help establish a clear record of your decisions and prevent unauthorized actions.

If you suspect elder financial fraud, take immediate action:

• Contact FINRA’s Securities Helpline for Seniors: You can call 844-574-3577 for assistance. This helpline is specifically designed to address concerns about potential financial exploitation and provide guidance to seniors.
• Consult with a Securities Law Firm: A New York elder financial fraud law firm, like Malecki Law, can provide the expertise needed to investigate your case and pursue appropriate remedies. Experienced attorneys can help you recover losses, hold wrongdoers accountable, and implement measures to prevent further harm.
• Report the Fraud: File a complaint with FINRA, the SEC, or a state regulator to initiate an investigation. Your attorney can guide you through this process and ensure your complaint is handled appropriately.

Identifying elder financial fraud early is key to minimizing losses. Some common red flags include:

• Unexplained account activity or large withdrawals.
• Sudden changes to account beneficiaries or financial plans.
• Pressure from a financial advisor to invest in high-risk or illiquid securities.
• Reluctance from a financial advisor to provide clear answers or documentation regarding account activity.

If you notice any of these warning signs, act quickly to protect yourself or your loved one.

By staying vigilant and taking proactive steps, seniors can safeguard their financial well-being and reduce the risk of exploitation. If you need assistance navigating these issues, Malecki Law is here to help.