Over the last few months and years, securities regulators have repeatedly emphasized the special care and attention senior investors should be afforded by broker-dealers and their associated persons. As part of that focus, on April 15, 2015, FINRA and the SEC Staff published their National Senior Investor Initiative Report. The report highlighted recent industry trends extrapolated from “44 examinations of broker-dealers in 2013 that focused on how firms conduct business with senior investors as they prepare for and enter retirement.”
A few days later, FINRA issued a press release announcing the launch of the toll-free “FINRA Securities Helpline for Seniors.” The main goal of the helpline is to “provide older investors with a supportive place to get assistance from knowledgeable FINRA staff related to concerns they have with their brokerage accounts and investments.” A few of us have joked here that the phone number should be 1-800-ENFORCEMENT.
Let me say this at the outset. There is nothing wrong with FINRA looking out for senior investors. It’s admirable.
But it is also low hanging fruit for the regulator. For the most part, there is nothing inherently unique about a senior investor. To begin with, any recommendation made to a senior investor must still be suitable for him/her (i.e., taking into account the investment objective, risk tolerance, financial situation and needs, etc.). Sure, their time horizon, liquidity needs and financial situation are likely to be different than a 30-year-old investor, but FINRA Rule 2111 – the “regular” suitability rule – already captures the duties owed to all investors. (There’s no special suitability rule for senior investors yet!) In addition, any risks associated with the recommendation must be properly and adequately disclosed.
Further, many other, much younger, unsuspecting investors lose money as a result of unsuitable recommendations or unscrupulous sales practices every day. Routinely, we read about FINRA Enforcement actions and/or arbitrations against broker-dealers and their associated persons for such transactions. Those with wealth are always at risk, even much younger professional athletes.
There is one circumstance, however, that I think is unique to senior investors – a rapidly deteriorating change in mental capacity. That unfortunate occurrence creates challenges to the industry that I’ll talk more about that in my next post.
 It is interesting that neither the SEC nor FINRA have ever defined exactly when an investor actually becomes a “senior.”