Elder Abuse on Wall Street




Although the high-profile prosecutions of insider trading and Ponzi schemes grabbed the bulk of last year’s headlines, among the more troubling developments of 2010 were signs of increased abuse of elderly clients by their financial advisors including:Borrowing from Elderly Clients. Rules and policies exist to govern this but are often ignored. When the lending client is elderly, a number of red flares must be lit and alarms need to be sounded before such an arrangement should be permitted. In many cases, elderly clients are overly trusting individuals who are easily duped into one-sided arrangements by lowlife predators.

Borrowing from Elderly Clients: In 2010, financial professionals did not shy away from borrowing from their senior citizen customers and such arrangements were often entered into replete with promises to repay the principal with handsome interest. However, many of those lending arrangements were in violation of industry rules and without the requisite permission of the employer. Of course, notwithstanding the promises (many made in formal written agreements with promissory notes), more than a few stockbrokers simply took the money and ran.

Alzheimer’s Patients — Twice Victimized. Among the more disgusting regulatory cases of 2010 were those involving financial advisors ripping off clients suffering from dementia and Alzheimer’s disease. More sophisticated efforts to defraud the elderly seem to extend to conduct whereby financial professionals exploited the trust and confidence of their clients in order to gain access to assets including bank accounts, credit cards, and real estate.

In some cases, the stockbroker convinced his clients to grant a General Power of Attorney. Another area of abuse is the use of credit cards attached to a client’s brokerage/bank accounts. Such fraud often included the use of Automatic Teller Machine (ATM) cards to withdraw funds without the victim’s knowledge (in some cases, the victims seem unaware that such cards had even been issued to them or that any ATM withdrawals had been made).

Account Churning and Improper Investments - What used to be the traditional rip-off of the elderly, the reckless churning of their accounts, seems to have fallen a bit out of fashion but not totally. There are still signs that unscrupulous brokers excessively traded such accounts and also invested their senior clients in unsuitable products

For more go to: blogs.forbes.com

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