Elder financial abuse is a serious problem in the United States. According to the Administration for Community Living (ACL), senior citizens lose more than $2.6 billion annually due to fraud and abuse.
Unfortunately, elder financial abuse is a chronically underreported issue. Many organizations believe that the true number is far higher.
In fact, the National Council on Aging (NCOA) believes the total amount may be as high as $36.5 billion.
At Sonn Law Group, our attorneys are dedicated advocates for older investors and their families. Here, we have put together a comprehensive guide on elder financial fraud. If you or a loved one was the victim of elder financial abuse, please do not hesitate to contact our law firm today for legal help.
Elder Financial Abuse Statistics
Understanding the Scope of the Problem
There is no question that elder financial abuse is a very serious problem in the United States. As we have mentioned, the true scope of the problem is not known. Estimates put the total cost of the financial exploitation of the elderly between $2.6 billion and $36.5 billion.
Any person can become a victim of financial fraud. The Securities and Exchange Commission (SEC) released a report on elder financial exploitation finding that somewhere between 5 percent and ten percent of seniors lose money to financial fraud each year.
Once again, the data in this area is poor. The SEC explicitly warns that the true figure may be substantially higher.
Why Fraudsters Often Target Elderly and Vulnerable People
While investors should worry about financial scams, elderly financial abuse has become an especially prevalent issue. Unscrupulous scammers are intentionally targeting elderly investors for fraud.
Regulators and investment fraud experts believe that elder financial exploitation is a growing problem for four different reasons:
- Senior investors have more resources: Unsurprisingly, older investors have more resources on average than do younger investors. Many senior citizens have built up a portfolio of investments over a lifetime. This portfolio should offer them financial security during retirement. Scammers see those retirement savings as a potential target.
- The elderly population is growing: There are more elderly investors than ever. In the coming years, that number is going to explode. With people living longer on average and the Baby Boomer generation set to fully retire in the coming decades, the percentage of the population made up of senior citizens will continue to rise.
- Many elderly investors are vulnerable targets: With old age often comes health problems and cognitive decline. It can be difficult for older investors to manage their money. As sad as it is, fraudsters see elderly investors as a soft target. They also know that it can be difficult for senior citizens to get help once they have been defrauded.
- The laws protecting vulnerable investors are weak: Currently, the securities laws and financial regulations that protect elderly investors are too weak. While FINRA has enacted Rule 2165 to help prevent the exploitation of ‘specified’ adults, more needs to be done to protect society’s most vulnerable people. Further, the resources available to vulnerable investors are simply inadequate. It can be difficult for investment fraud victims to know where to turn for help.
Common Forms of Elder Financial Abuse
Broker and Financial Advisor Misconduct
For a vulnerable senior citizen investor, it makes sense to hire a professional. Many older investors trust their money to registered brokerage firms and registered investment advisors. Unfortunately, even with FINRA-regulated firms, broker fraud and broker negligence are still serious problems.
Our law firm has handled FINRA arbitration claims involving:
- Unsuitable investment recommendations;
- Material misrepresentations and material omissions;
- Excessive trading (churning);
- Lack of diversification (overconcentration of investments); and
- Outright conversion (theft) of an elderly investor’s funds.
Alternative Investments and Unregistered Securities
Outside of registered brokerage firms, elderly investors are frequently targeted for so-called alternative investments. These investments are typically not offered by a FINRA brokerage firm because they are too speculative or too risky.
Often they will involve unregistered securities or another type of highly complex financial product.
With limited exceptions, these investments are simply not suitable for elderly investors. Yet, they are still pushed aggressively.
An elderly investor may find themselves in this type of investment through a cold call or direct mailing. To make matters even worse, these investments are often more than just ‘too risky’ for elderly investors: they can be outright scams. Elderly investors are often targeted by phone scams, mass mailing scams, and internet fraud.
Sometimes, an investment that may appear to be a legitimate opportunity may in reality be nothing more than a complex Ponzi scheme. The operators of Ponzi schemes are known to look for elderly and vulnerable people.
For example, the SEC recently halted a $102 million Ponzi scheme that defrauded more than 600 investors. The fraud victims were disproportionately senior citizens.
Finally, caregivers are also often implicated in the financial exploitation of the elderly. It could be a caregiver at an officially licensed nursing home, or a close friend or family member that has access to the finances of the vulnerable person.
In some cases, fraudsters go so far as to obtain the power of attorney (POA) of the elderly person. This legal authority gives a person tremendous access to a vulnerable person’s finances. Caregiver fraud comes in many different forms, including:
- Forging signatures on checks and other financial documents;
- Manipulating an elderly person into giving up money or property;
- Pressuring an elderly person to alter important legal or financial documents;
- Obtaining money or property under false or misleading pretenses; and
- Outright stealing money or assets.
The Important Documents and Evidence that Elder Financial Abuse Victims Should Gather
If you suspect financial elder abuse, you need to be ready to help your loved one take action to protect their legal rights and financial interests. In cases involving the alleged financial exploitation of the elderly, comprehensive and well-organized documentation is extremely important.
Some of the key documents and records that investment fraud victims need to gather include:
- Full bank records;
- Receipts and cancelled checks
- Investment accounts statements;
- Legal documents, including POA and wills;
- Any evidence of unpaid bills;
- Evidence of forged documents or signatures;
- An accounting of any possible missing property or assets;
- Letters from creditors or other companies; and
- Any and all correspondence with the alleged perpetrator.
What Resources are Available for Seniors Who Suspect Financial Abuse?
The FINRA Securities Helpline for Seniors
If you believe that your broker or financial advisor is stealing from you or your elderly loved one, you can start by reporting the problem to the Financial Industry Regulatory Authority (FINRA) helpline for senior investors.
This helpline can be reached at (844) 574-3577. Full information about how the helpline works can be found here.
The Securities and Exchange Commission and State Regulators
You can also get help from securities regulators. This option is most useful if you believe that your loved one has been caught up in a major investment fraud scheme. For example, if your loved one was the victim of a major Ponzi scheme, you will need to know how to report a Ponzi scheme.
You may want to raise the issue with the SEC. You can submit a tip directly online and you can reach out to their office by phone for additional help.
Adult Protective Services and Law Enforcement
In other cases, the best place to turn is to state or federal law enforcement or your state’s adult protective services department. Ultimately, this will always depend on the specific circumstances involved in your case. Adult protective services is often a great place to start if you believe that your loved one is being financially exploited by a professional caregiver. If a trusted friend, family member, or neighbor is stealing from your elderly loved one, you may want to contact the police.
An Investment Fraud Attorney
Finally, all elder financial fraud victims should be represented by an experienced securities fraud attorney. While reporting the fraud to government regulators and law enforcement agencies is an important step in the legal process, it is also one that is insufficient to help you and your loved one recover financial compensation.
An investment fraud lawyer will be able to help you take action to protect your rights. At Sonn Law Group, our elder financial fraud lawyers will:
- Carefully investigate your claim;
- Work to obtain and assemble all relevant evidence;
- Help you explore all available legal options; and
- Take action to help you get justice and full compensation.
Learn Your Rights
If you’ve suffered significant losses in your investment accounts, talk to a lawyer who will explain your rights and options, free of charge.
Speak to an Investment Fraud Lawyer Today
At Sonn Law Group, we are committed to representing the financial interests of senior citizen investors. If you or your loved one lost money due to fraud, we can help. For a free, no risk initial investment fraud consultation, please contact our law firm today.