SEC Staff and FINRA Issue Report on National Senior Investor Initiative

WASHINGTON—With the Social Security Administration estimating that each day for the next 15 years, an average of 10,000 Americans will turn 65, the staff of the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) today issued a report to help broker-dealers assess, craft, or refine their policies and procedures for investors as they prepare for and enter into retirement.  

The

includes observations and practices identified in examinations that focused on how firms conduct business with senior investors. The examinations by the SEC’s Office of Compliance Inspections and Examinations (OCIE) and FINRA focused on the types of securities purchased by senior investors, the suitability of recommended investments, training of brokerage firm representatives, marketing, communications, use of designations such as “senior specialist,” account documentation, disclosures, customer complaints and supervision.

According to the most recent U.S. Census Bureau data, in 2011, more than 13 percent of those living in the United States, or more than 41 million people, were 65 or older. By 2040, that number is expected to exceed 79 million, more than twice as many as in the year 2000. Given that, OCIE and FINRA staff are keenly focused on issues related to senior investors and regard compliance with laws, rules and regulations applicable to senior investors to be a high regulatory priority. At a time of historically low yields on traditional savings accounts and more conservative investments, OCIE and FINRA staff are concerned that some broker-dealers may be recommending riskier and possibly unsuitable securities to senior investors looking for higher returns, and may be failing to adequately disclose the terms and risks of the securities they recommend.

Andrew J. Bowden, OCIE’s Director, said, “Seniors are more dependent than ever on their own investments for retirement. Broker-dealers are developing and offering a variety of new products and services that are intended to generate higher yields in a low interest rate environment. It is imperative that firms are recommending suitable investments and providing proper disclosures regarding the related terms and risks.”

“With the dramatic increase in the population of our nation’s seniors, it is critical that securities regulators work collaboratively to make sure that senior investors are treated fairly. The culture of compliance at firms is key to ensuring that seniors receive suitable recommendations and proper disclosures of the risks, benefits and costs of any investments they are purchasing,” said Susan Axelrod, FINRA Executive Vice President, Regulatory Operations.

FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business—from registering and educating all industry participants to examining securities firms, writing rules, enforcing those rules and the federal securities laws, and informing and educating the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers the largest dispute resolution forum for investors and firms. For more information, please visit www.finra.org.