Securities and Exchange Commission Roundtable on Combating Elder Investor Fraud

Securities and Exchange Commission

“Roundtable on Combating Elder Investor Fraud”

Thursday, October 3, 2019


Chairman Jay Clayton

In his opening statement, Clayton said that protecting older Americans from investor fraud is an important mission, noting it is an essential part of the Securities and Exchange Commission’s (SEC) mission to educate and empower investors so they can plan for a financially secure future. Clayton said it “keeps [him] up at night” that every day fraudsters are targeting elders to try to rob them of their hard-earned money. He noted that the National Council on Aging found that elder financial abuse costs Americans $36.5 billion annually. Clayton said that preventing fraud is critical, highlighting that many older Americans often do not have other financial resources to turn to if they lose their savings to fraud or exploitation.

Panel One – Intersection of Health, Wealth and Advocacy


  • Lisa Bleier, Managing Director and Associate General Counsel, SIFMA
  • Lori Delagrammatikas, Executive Director, NAPSA
  • Nicole Iannarone, Assistant Professor of Law, Drexel University Thomas R. Kline School of Law
  • Amy Nofziger, Director, AARP Fraud Watch Network Helpline
  • Francis X. Shen, Associate Professor of Law, University of Minnesota Law School; Executive Director, Harvard MGH Center for Law, Brain & Behavior
  • Moderator: M. Owen Donley, III, Chief Counsel, Office of Investor Education and Advocacy, SEC

Shen gave an overview of how the brain changes as people age, saying that although knowledge about the brain and cognitive decline has improved, much is still unknown. He explained that age changes every brain differently, saying that some decline involves severe loss of financial capacity while in others, the decline is progressive. He noted that the legal constructs around capacity are different than the scientific and medical constructs, explaining that a medical diagnosis does not necessarily determine what legal action is necessary. Shen explained there are four factors he looks at to determine the ability to manage financial affairs: basic monetary knowledge and calculation skills, financial conceptual knowledge, financial procedural knowledge, and judgement.

Bleier discussed how financial institutions can step in, explaining SIFMA’s work with its member firms to identify red flags of exploitation. Bleier highlighted how social isolation can play a role in exploitation, as well as cognitive indicators such as an inability to make basic mathematical calculation, frequent account password resets, or repeatedly asking for the same trade, saying firms need to focus on noticing changes in the behavior of their clients.

Delagrammatikas said that most exploitation Adult Protective Services (APS) sees is committed by family members including power of attorney abuse, misuse of credit cards and other types of fraud. She called on financial institutions to report to APS, noting that if a fraudster is willing to steal money, they also may be willing to neglect or physically abuse an older adult, and if a senior is scammed it could mean they are no longer able to take care of themselves on their own. Delagrammatikas also stressed the importance of follow-up with documentation after filing a report to provide evidence to investigators. She highlighted the importance of multi-disciplinary teams (MDTs), which bring people from various disciplines together to work on tough cases. Delagrammatikas and Bleier pointed to a new records request form, which NAPSA and financial institutions worked together to develop to ensure it works both for APS and financial services firms.

Iannarone discussed her work with victims of financial fraud, highlighting that many victims blame themselves, making it difficult for them to come forward and seek help. She said victims often do not care about the motives of fraudsters, but care most that they were harmed, how it will affect their quality of life, and their ability to seek redress and become whole again. She stressed the importance of finding ways to support legal clinics that are free for investors to help victims.

Asked about the role of caregivers, Bleier highlighted that seniors need an interconnected social network where trusted individuals are not only checking on the senior, but also talking to each other. Delagrammatikas explained the concept of supported decision making, wherein a senior relies on various people for advice and support.

Bleier also highlighted two Financial Industry Regulatory Authority (FINRA) rules designed to help combat elder abuse, Rule 2165 and Rule 4512, which allow firms to pause disbursements and require them to seek a trusted contact, respectively. Bleier said financial institutions have been working on these issues for years, creating internal teams and collaborating on how to best address it within their institutions. Bleier also noted SIFMA’s Senior Investor Protection Toolkit, comprising resources for financial firms to identify exploitation, and Senior Investor Protection Regional Seminar series, which brings together APS, the state securities administrators, local prosecutors, financial institutions and others working through these issues.

Iannarone stressed the importance of the impact on individual investors. She said that if all the focus is on prevention, there are victims who then think it is their fault and nothing can be done after the fact. She said victims need to know the fraud is not their fault and they should ask for help. Shen added that the focus should not be solely on whether an individual can do a math problem to determine if they are at risk, but also if they are lonely or acting out of fear.

Delagrammatikas explained that in terms of education, many seniors do not hear the message that they could become a victim, but they do respond when they are told that learning about scams and fraud can help them protect their friends and neighbors, saying this is a better way to spread the message. Bleier noted that when seniors have heard about scams they are more likely to recognize them if they happens to them.

Panel Two – Enhancing the Ability of Financial Institutions to Combat Senior Financial Fraud


  • Marin Gibson, Managing Director and Associate General Counsel, State Government Affairs, SIFMA
  • Jean Setzfand, Senior Vice President, AARP Programs, AARP
  • Judith Shaw, Securities Administrator, Maine Office of Securities
  • Jeanette Wingler, Associate General Counsel, Office of General Counsel, FINRA
  • Moderator: Lourdes Gonzalez, Assistant Chief Counsel, Division of Trading and Markets, Office of Sales Practices, SEC

Shaw highlighted that social isolation is becoming a “critical” factor in exploitation, saying the best approach is one that is holistic and community-based that leverages the tools available at the federal and state levels. She said that those on the front lines on branch offices of financial institutions need and want to understand reporting mechanisms as well as what community-based resources are available.

Gibson explained that SIFMA ramped up its efforts in this space in 2006 and 2007, when a number of member firms began seeing a significant uptick in the exploitation of their clients but lacked the right tools, particularly at the state level, to allow them not to execute a client request. She explained that SIFMA worked with the state of Washington in 2009 to develop the first “report and hold” bill to allow firms to hold a transaction and report suspicions to law enforcement, adding that now about half of all states have some version of the law in place covering about one-third of Americans. She noted that firms have made significant investments in developing policies and practices to protect their clients.

Setzfand noted that it is difficult to define the scope of the problem due to the lack of data on the issue. She said, however, that the most troublesome data point from AARP’s perspective is that although more younger individuals are reporting scams to the Federal Trade Commission (FTC), older victims are losing more, saying that the impact is greater and there is less time to recover for older individuals. Setzfand said telephones are still the primary avenue for elder fraud, noting that 4.8 billion robocalls were placed in the U.S. in August alone, 45 percent of which were scams.

Wingler discussed the steps FINRA has taken to address the issue, including establishing a senior helpline, educational resources, and Rules 2165 and 4512. She noted that the worst harm occurs when money leaves an account, as it is very difficult or impossible to ever get back.

Asked what investors can do to protect themselves, Gibson said that self-education about scams is important, as well as seniors ensuring their paperwork is in order, such as power of attorney documents. She also highlighted the importance of communicating clearly with a financial professional about goals and risks. Shaw stressed the importance of seniors having early conversation with their children so the relationship and trust can progress. Setzfand noted that recent FINRA research shows that investor education does work, and that AARP also has a helpline.

Asked what federal and state rules apply to broker-dealers in this space, Wingler noted that FINRA recently launched a retrospective rule review to solicit comments about how the rules are operating in practice. Shaw highlighted the North American Securities Administrators Association (NASAA) model for state laws as well as the Senior Safe Act, a federal law that provides additional protections from liability to financial institutions who report exploitation. Gibson noted that the training requirements in the Senior Safe Act are helpful, though highlighted that generally financial firms are proactively conducting trainings. She also noted that an issue with model state legislation is that every state has different underlying laws that are affected, such as different definitions of “vulnerable,” that must be taken into account.

Wingler said that FINRA has heard from firms that Rule 2165 only addresses disbursements, not underlying transactions. She said that with a transaction, even though the money is still in the account, if someone being exploited cashes out of a security or variable annuity they can still experience significant harm. Gibson agreed that this is an issue.

Gibson noted that the lack of good data is also an impediment to addressing exploitation effectively. She highlighted that SIFMA is working with partners on a Department of Justice (DOJ) grant to develop a single-portal reporting system to eliminate some of the friction that currently exists in the reporting process.

Afternoon Remarks

Commissioner Elad Roisman

In his remarks, Roisman expressed that the SEC is “very” focused on senior financial exploitation. He added that Clayton has highlighted combating invested fraud to be important and that protecting seniors is fundamental to the SEC’s core mission. Roisman said that victims of financial fraud are often affected well beyond financial damage. He stated some examples of how the SEC is combating fraud include educational components, rulemaking efforts to close gaps, and SEC employee volunteering and conducting outreach at events. Roisman added that the SEC works closely with other regulatory agencies, self-regulatory organizations (SROs), FINRA and others to coordinate protection efforts.

Sen. Susan Collins (R-Maine), Chair, Senate Special Committee on Aging

In her remarks, Collins stated that it is “essential” regulators, brokers dealers, and financial advisers join together to identify, prevent and fight against the exploitation of seniors. She emphasized that protecting seniors from all forms of financial abuse is among the highest of her priorities, as senior fraud amounts to $3 billion loss annually. Collins applauded the Senior Safe Initiative in Maine that brings the private sector, nonprofit, and government together to protect seniors. She stated that policymakers must ensure regulators and law enforcement have the tools to prevent and prosecute fraudsters.

Panel Three – Fraudulent and Manipulative Financial Schemes Targeting Seniors


  • Gustav Eyler, Director, Consumer Protection Branch, U.S. Department of Justice
  • Michael Herndon, Deputy Assistant Director, Office for Older Americans, Consumer Financial Protection Bureau
  • Lisa Hopkins, Senior Deputy Securities Commissioner and General Counsel, West Virginia State Auditor’s Office
  • Christopher Kelly, Senior Vice President, Sales Practice Enforcement, FINRA
  • Laura Richardson, Section Chief, Intelligence Division, Financial Crimes Enforcement Network
  • Moderator: Charu Chandrasekhar, Head, Retail Strategy Task Force, SEC

Chandrasekhar asked the panel to address the tools they use to detect fraud, challenges they face in their respective industries, and recommendations on how to protect against and prevent senior fraud. Additionally, she asked about coordination efforts, types of frauds, specific challenges each industry faces and areas of success.

Eyler stated that the DOJ spends a “great deal of time” on elder fraud, as it is amongst the highest priorities for the administration. He emphasized that after the passage of the Elder Abuse Prevention and Prosecution Act, every U.S. Attorney’s office now has an elder justice coordinator. He added that the DOJ developed the Transnational Elder Task Force, as the DOJ mostly focuses on complicated and often transnational schemes. Eyler said that schemes that the DOJ commonly comes across are telephone-based fraud, tech support schemes, or mass mailings, where the perpetrator is overseas. He said that the DOJ uses suspicious activity reports (SARs) to trace where the money is going, and to coordinate with the Treasury Departments Financial Crimes Enforcement Network (FinCEN), the FTC and other partners to identify and target schemes. Eyler added that the DOJ has worked to bring together federal and state enforcement to coordinate combative efforts.

Herndon stated that the Consumer Financial Protection Bureau’s (CFPB) report on suspected elder financial exploitation found that financial exploitation has increased, but so has the number of reporting mechanisms to combat fraud. He added that 50 percent of exploitation comes from an unknown individual, while 36 percent of cases are committed by a trusted person. He stated that fraud from a trusted person is $50,000 greater, due to a variety of reasons. Herndon stated that challenges that may arise would be due to the lack of resources as the number of seniors over 65 increases. He recommended that outreach, educational effort and multidisciplinary coordination occur to protect and prevent senior fraud, as well as to measure the impact changes and reporting have had nationwide.

Hopkins stated a challenge that seniors often face is awareness of tools and resources and knowledge of the availability to report fraud. She added that at times, the fraud that has occurred is unknown until it hits a “mass.” Hopkins added that NASAA provides seniors the tools and resources to help identify and combat fraud, such as identifying trends through its website. She recommended adopting the NASAA model for industry and government to better coordinate efforts combating fraud. Hopkins added that a multi-state coordinated effort is also a useful tool in this area.

Kelly said that schemes often occur where a broker-dealer exploits a long-term relationship and that in these cases it is difficult to identify wrongdoing. He added that reasons include that the victim has since passed once fraud is suspected or there is no way to identify if the victim was incapacitated. Kelly recommended that more tools and resources be provided across the industry to identify and combat senior fraud. He added that FINRA faces the challenge of customer cooperation, as many individuals do not know of FINRA.

Richardson focused on the importance of SARs and stated that fraud is often undetected due to their filing timeline of SARs. However, she said that SARs help identify where fraud has occurred and helps fraud reporting and prevention. Richardson emphasized that SARs are used for analysis to measure trends, patterns, and the type of exploitation that occurs. She added that with the number of SARs collected and coordination efforts, FinCEN can coordinate with the DOJ to bring fraud cases forward.

Closing Remarks

Commissioner Allison Herren Lee

In her closing remarks, Lee emphasized the devasting effect of senior financial fraud, adding that it has cost seniors millions of dollars and their peace of mind. She emphasized Clayton’s note that enforcement is not enough, and applauded awareness efforts by SIFMA and the NASAA model. Lee suggested that the SEC consider the risks to seniors in rulemaking efforts and lauded the importance of today’s roundtable for public and private efforts to combat senior fraud.

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