The House of Representatives recently passed a bill that would create a task force dedicated to combating the exploitation of senior investors.
The Senior Security Act mandates the Securities and Exchange Commission (SEC) to form a task force that would identify challenges that senior investors face, including problems associated with financial exploitation and cognitive decline, along with regulatory changes that could benefit seniors.
First Keystone Community Bank (FKCB) is committed to protecting bank customers against elder financial exploitation by educating them to prevent financial fraud.
Senior investors are increasingly targeted by various financial scammers using tactics from pyramid schemes to high-yield investment programs. Scammers prey on the emotional vulnerabilities of seniors like depression and isolation to convince victims their well-being is foremost in the mind of the predator.
“Trust is extremely important to launching a successful scam so it’s usually the priority of the fraudster to begin there,” said the FKCB Fraud Department. “Once a scammer has the trust of the victim, it’s easy to initiate the scheme. If the scammer is successful, the victim could lose investment funds that have been accrued over decades, with little to no chance to rebuild the funds.”
In recent years, securities fraud against older investors has increased significantly, with the following examples most prevalent.
High Return or Risk-Free Investments
Investors should be cautious of opportunities that promise amazing profits or guaranteed returns. No investment is risk-free. Fraudsters will often make unrealistic claims that are meant to sound official and enticing.
Charitable Gift Annuities
In this type of scheme, fraudsters pose as representatives of a charitable organization offering monthly annuity payments in exchange for payments which supposedly will be invested to pay an annuity to the investor and to benefit the charitable organization, which is merely a front. When investing in charitable annuities, senior investors should make sure that the salesperson represents a legitimate charitable organization and that the organization is fully aware of the salesperson’s activities.
Sale and Leaseback Contracts
Some investments are structured to resemble the sale of a piece of equipment such as a payphone or ATM located at a remote venue where the investor cannot maintain it and must enter into a servicing agreement. Investors are promised a specific rate of return and that the equipment can be sold back to the seller at the investor’s original purchase price. Or investors are offered a long-term lease in a resort community that doesn’t exist. Investors should be wary of any sale and leaseback contract and should seek the advice of an objective third party when in doubt.
The first step to preventing senior investment scams is identifying the signs of fraud. The FKCB Fraud Department issued the following red flags of investment fraud:
- High pressure sales tactics
- Guaranteed high returns with little to no risk
- Unregistered and unlicensed sellers
- Pressure to buy quickly
- Requests for unusual withdrawals or wire transfers
- Offers of free meals and other perks, most often associated with “investment seminars”
- Unsolicited emails and news releases
Seniors should always be vigilant of the signs of fraud. Recognizing these red flags can help seniors make informed investment decisions and protect their hard-earned money. If someone misrepresents that they are registered or impersonates a registered investment professional, report it to the SEC.
For more information on sound financial investing, contact the professionals at First Keystone Community Bank at 570.752.3671.
