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Robert W Pearce
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Mr. Pearce has tried, arbitrated and mediated numerous disputes involving complex securities, commodities, administrative, contract, commercial, business tort and employment law issues for over 30 years. He has represented hundreds of clients in Federal and state courts (trial and appellate) as... More
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The Law Offices of Robert Wayne Pearce, P.A.
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The Investor's Rights Law Blog
    Nov 26, 2012 9:26 AM

    "Complaints [involving seniors and financial scammers] are rising," according to Jack Herstein, president of the North American Securities Administrators Association (NASAA) and assistant director of the Nebraska securities regulator. Mr. Herstein added that the increased number of complaints is partly responsible for the increased number of enforcement actions. The association of state securities regulators reportedly filed 1,241 such enforcement actions in 2010, the latest year for which data has been compiled - more than double the 506 enforcement actions filed in 2009 ("Financial Scammers Prey on Seniors," by Anne Teresen, Wall Street Journal).

    Unfortunately, older people make attractive targets for investment scams, in part, because they often have more investable assets, and are more susceptible to sales pitches due to factors associated with aging, such as loneliness and cognitive disabilities, according to the article.

    Seniors who must rely on a fixed income to meet expenses may experience financial hardship as a result of today's ultralow interest rates and poor investment returns. They are, therefore, more inclined to be lured by promises of higher returns and private (Reg D) investments, which are often promoted as being stable-value investments - i.e., not correlated with the price movements of traditional stocks and bonds.

    Since private (Reg D) investments are unregistered and virtually unregulated, it is easy for scam artists to peddle fraudulent securities that promise attractive returns. State enforcement actions involving unregistered securities, including promissory notes and private placements, exceed those involving traditional stock and bond investments by a factor of five to one, according to NASAA.

    In addition to outright fraud, NASAA is seeing more cases of unsuitable investment recommendations being made to those over the age of 50. Examples of unsuitable products include variable annuities, which impose substantial "surrender" charges on investors who seek to liquidate their investments within a set number of years of the purchase date.

    "Someone who is 85 should not be sold a variable annuity with a 15-year surrender charge. That's not suitable," Mr. Herstein was quoted as saying.

    Elderly victims of financial abuse lost $2.9 billion in 2010, up 12% from $2.6 billion in 2008, according to the article, citing a study by MetLife Mature Market Institute. "[M]any of these cases go unreported," Institute director Sandra Timmermann was quoted as saying.

    Adult children are often in the best position to recognize potential investment fraud and take preventive or corrective action. It may be beneficial for seniors to sign up for the National Do Not Call Registry (888-382-1222) in order to minimize unsolicited calls from potential scammers. What to do with the telemarketing calls that make it through anyway? Just hang up on them - without saying a word. Zero tolerance for unsolicited sales calls is the best policy.

    Depending on the circumstances, adult children may offer to monitor a parent's bank, brokerage and credit-card statements. "You might volunteer to help a parent go through the bills," Ms. Timmermann was quoted as saying. (On the other hand, the financial abuser is sometimes an adult child, so this can be a complicated, touchy subject.)

    Unpaid bills, an increase in the use of ATM or credit cards, or disappearing valuables are red flags that may signal a serious problem, according to the article.

    For more information, the article refers those who suspect financial abuse to, 800-677-1116 for a referral to adult protective services, local police departments, and state securities regulators, which can be found at

    The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website,, post a comment, call (800) 732-2889, or email Mr. Pearce at for answers to any of your questions about this blog post and/or any related matter.

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