National Senior Investor Initiative

On April 15, 2015 the SEC and FINRA issued a report, National Senior Investor Initiative. Together the SEC Office of Compliance Inspections & Examinations and FINRA conducted a review of 44 broker-dealers to look at “how firms conduct business with senior investors [65 and older] as they prepare for and enter into retirement.” The examinations looked a long list of items in broker-dealer interactions with clients 65 and older, including “how firms address issues relating to aging (e.g., diminished capacity and elder financial abuse or exploitation)…”

This report highlights recent industry trends that have impacted the investment landscape and prior regulatory initiatives that have concentrated on senior investors and industry practices related to senior investors. Additionally, the report discusses key observations and practices identified during the recent series of examinations.

The 42 page report, after providing background on the initiative, discusses 9 topics, including documentation, disclosures, complaints, training, supervision, suitability, marketing, “senior designations” and securities purchased.  Each section contains a conclusion as well as “notable practices.”  The overall conclusion includes this excerpt

The current environment, where traditional savings accounts and other conservative investments are earning historically low yields, may prompt firms to recommend and senior investors to purchase more non-traditional securities, such as variable annuities, non-traded REITs, structured products, and other alternative products. OCIE and FINRA staff are concerned that broker-dealers may be recommending unsuitable securities to senior investors or failing to adequately disclose the related risks. It is imperative that senior investors receive proper and understandable disclosures regarding the terms and risks related to securities recommended to them, particularly non-traditional investments.