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Bill Protects Seniors From Financial Fraud
Michael A. Piekarz
U.S. Senate bill called the Senior Investor Protection Act of 2008
(SIPA) was recently introduced in a federal move targeting criminal
investment advisors who take advantage of loopholes in state laws
to prey upon senior investors.
The bill, introduced by Senator Herb Kohl, D-Wis., chairman of the U.S. Senate
Special Committee on Aging, and Senator David Vitter, R-La., offers the resources
necessary to protect seniors from unscrupulous financial advisors who prey on
the retirement savings of the elderly by touting misleading or fraudulent “senior
SIPA would create a new grant program that encourages state regulators to adopt
a uniform standard for the accreditation of senior financial advisors, and it
would assist states in their efforts to protect seniors from being duped by these
A huge number of seniors have been targeted by unscrupulous salesmen using these
designations. Many have lost their life savings because they were steered toward
investment instruments that were unsuitable for them based upon their retirement
needs and life expectancy.
SIPA is a response to the Aging Committee’s September 2007 hearing which
examined questionable practices used by so-called senior financial investment
specialists in order to gain access to the retirement savings of older Americans.
The investigation revealed that many of the designations appearing represent
limited or no value with respect toward advising seniors on financial matters
and that often these designations are obtained simply by attending a weekend
seminar and passing an open-book, multiple choice test.
In many cases, state licensing requirements for investment advisors were found
to be far less stringent than those needed to practice in other professions.
“We know that an attorney must go to school for three years and pass a
state bar exam. A CPA must have a college degree, an additional year of study
and must pass a national exam. Neither can offer their professional services
without those credentials,” said Chairman Kohl.
This discrepancy bothered lawmakers when it was unearthed by the investigation.
“Seniors should be able to trust the people who invest their money. They
should not be worried that the title after their advisor’s name is scarcely
more than a marketing ploy and that it was not earned through sufficiently rigorous
financial education or training,” said Kohl.
The bill’s authors felt that it was time to provide the states with the
resources needed to enact more stringent laws.
“Every service provider should be accountable for the work they offer -
especially when that service regards the life savings and investments of our
seniors. This bill encourages states to enact regulations that promote more accountability
and protections to help seniors identify ethical businesses and avoid scams,” said
The bill provides the states with incentives to improve their own rules regarding
the use of designations by encouraging them to adopt provisions outlined in the
North American Securities Administrators Association’s (NASAA) new model
rule on the use of senior designations announced during that organization’s
recent national public policy conference.
SIPA also calls on the investment and insurance industries to be part of the
solution. The National Association of Insurance Commissioners will work with
NASAA to develop improved senior designation rules and suitability standards
for insurance products such as deferred variable annuities, which may be inappropriately
sold to seniors.
Grants provided by the legislation are designed to give states the flexibility
to use funds for a wide variety of senior investor protection efforts. The legislation
has been endorsed by NASAA, The American College and the Financial Planning Association.
“This significant legislation would provide states with additional resources
to protect seniors from being harmed by financial salespeople who place their
interest in generating sales commissions ahead of the best interests of the senior
investor,” said Karen Tyler, North Dakota Securities Commissioner and president
“In an era when the public is concerned from Main Street to Wall Street,
we need legislation that will help consumers understand that some ‘credentials’ in
insurance and financial services are not worth the paper they are printed on
while other professional designations represent years of rigorous study,” said
Larry Barton, Ph.D., president and CEO of The American College.
Barton also decried the injury to the investment industry as a whole caused by
salesmen using misleading credentials.
“It’s a shame that our financial system hasn’t evolved to the
point where all financial services professionals must put the client’s
interest first,” said FPA president Mark Johannessen.
“Taking advantage of seniors by misrepresenting the advisor’s qualifications
in particular is just wrong, if not criminal. We believe this legislation will
go a long way in helping the elderly avoid a potential loss when dealing with
an unethical or fraudulent advisor.”
Further action on SIPA is pending before the Senate.
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