William Galvin, the Massachusetts Secretary of the Commonwealth, is subpoenaing 15 brokerage firms in its probe into complex products that were sold to older investors. Morgan Stanley (MS), LPL Financial (LPLA), Merrill Lynch (MER), UBS AG (UBS), Bank of America Corp. (BAC), Fidelity Investments, Wells Fargo & Co. (WFC), Charles Schwab Corp (SCHW), & TD Ameritrade (AMTD) are among the broker-dealers that received notices from the state. The subpoenas are seeking information about investments that were sold to Massachusetts seniors, as well as data about the firms’ compliance, supervision, and training.
Galvin noted that when such investments are sold to inexperienced investors, this creates potential “accidents waiting to happen.” He is among a number of regulators that have expressed worry about how many complex products are being marketed to unsophisticated investors that want higher returns during this era of low interest rates. These financial instruments tend to be among brokers’ favorites because they garner higher commissions.
Already, Galvin has brought in over $11 million in fines from brokerage firms that sold illiquid real estate investment trusts to investors in Massachusetts. This type of REIT is hard to sell when a customer wants out. Galvin said that it was during that probe his staff discovered there were a lot of brokers, who were not only inadequately supervised, but also they were selling complex financial instruments that went beyond even their comprehension. The Massachusetts’s regulator office will continue to look into REITs, in addition into oil and gas partnerships, structured products, and private placement deals.
There was a time when such investments were only for sophisticated investors with an at least $1 million net worth. Now, in the wake of the financial crisis, complex financial instruments have been available to more people, including a lot of older Americans who want to offset losses that their retirement portfolios sustained when the economy tanked.
It is important for seniors to note that not all investments are suitable for them and their needs. Unfortunately, older investors make easy targets for investment fraud, in part because they tend to have large nest eggs for retirement, and, also, because some of them may have lost the ability to discern when they are being taken advantage of.
Sometimes senior investors are the target of an actual securities scam. On other occasions, they were unfortunate enough to work with a financial adviser that, out of ignorance or hoping to make a bigger commission, persuaded them to get involved in financial products that came with risks that were greater than what their funds could handle/or and incompatible with their investment goals.
At The Resolution Law Group, we help older investors of elder fraud recoup their losses. If you feel you are the victim of Elder Fraud, please do not hesitate to email or call the The Resolution Law Group (203) 542-7275 for a confidential, no obligation consultation.
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