Exploring the Benefits of FINRA’s Securities Helpline for Seniors

By Josh Gutter

In late September 2016, the SEC charged a CEO and boiler room operator “with defrauding seniors and others who were pressured to invest in a pair of penny stock companies and promised lucrative profits.”  This crime is just one example of how senior citizens can become the victims of financial fraud.  In an effort to help seniors better understand their investments and brokerage accounts, the Financial Industry Regulatory Authority (FINRA) launched its Securities Helpline for Seniors in April 2015.  In addition to asking questions or raising concerns, seniors can also learn about helpful investor tools such as BrokerCheck.

Historically, FINRA has issued regulatory notices and other literature regarding senior investors.  For example, in 2007, FINRA released guidance reminding firms of their obligations to senior investors and highlighting the best practices to serve them.  But at the end of last year, FINRA published a report detailing the progress of its Helpline and its increasing need to serve the aging population.  The report noted that, “In 2010, the U.S. population over age 65 was approximately 40 million; by 2030 it is projected to grow by 80 percent to 72 million people.  This presents significant investor protection challenges. The effects of aging can diminish an individual’s ability to navigate the complexities of financial services, making seniors a prime target for financial exploitation, fraud and deception.”   Because of this, firms must also be more mindful about how they transact with senior investors.  FINRA and the SEC published a joint report through their National Senior Investor Initiative, and this publication provides useful information on “how firms conduct business with senior investors as they prepare for and enter into retirement.”  Topics include use of senior designations, marketing and communications, account documentation, suitability, disclosures, customer complaints, and supervision.

But with respect to Helpline activity, the average age of callers has been 70 years old, and at the time of FINRA’s December 2015 report, the Helpline had received more than 2,500 calls.  By the Helpline’s one-year anniversary, that number reached 4,200 calls.  Furthermore, the Helpline has also recovered over $1.3 million in voluntary reimbursements from firms since its launch.  Another benefit of having this Helpline is that it has brought attention to other types of financial exploitation of seniors, prompting a regulatory notice last year that proposed more rules for firms to protect senior investors.  In particular, “among these issues is a firm’s ability to quickly and effectively address suspected financial exploitation of seniors and other vulnerable adults” when there is a reasonable belief that such activity is occurring.

Thus, although senior investors can be a vulnerable target, with resources like the Securities Helpline for Seniors, they can take proactive steps to ask their questions and safeguard their accounts, while helping shape future rules to prevent the financial exploitation of their significant and growing demographic.