Firms Faulted Over Misleading Seniors At Investing Events
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Monday, September 10, 2007
An investigation by federal and state regulators of "free lunch" investment seminars aimed at seniors has found high-pressure sales pitches masquerading as educational sessions, pervasive misleading claims for unsuitable financial products and even fraud.
Much of the blame goes to investment firms for failing to properly supervise their employees who put on the seminars for seniors, according to the report of the investigation being made public today. By law, the sales pitches made at the seminars and the materials provided to participants must be approved by a brokerage or investment firm's supervisors.
The examination by the Securities and Exchange Commission, state regulators and the securities industry's self-policing organization, the Financial Industry Regulatory Authority, covered seven states that have large numbers of retirees: Alabama, Arizona, California, Florida, North Carolina, South Carolina and Texas.
The investigation, which ran from April 2006 to June 2007, focused on 110 investment firms and branch offices that sponsor sales seminars for seniors with free meals.
SEC Chairman Christopher Cox called the investigation's findings "a wake-up call for securities regulators, the financial-services industry and, especially, older investors."
"The SEC and our fellow regulators intend to put a stop to this," Cox said in a statement. "We will step in whenever false claims are being made. We will sanction crooks who try to feast on the life savings of older investors."
Among the findings:
? The popular "free lunch" or dinner seminars, often held at upscale hotels, restaurants and golf courses, are advertised as educational sessions or workshops at which no products will be sold. They are actually sales presentations, pushing those attending to open accounts and make investments on the spot or in follow-up meetings with the salespeople.
? Nearly 60 percent of the 110 investment firms and branch offices examined showed evidence of weak supervision of the employees running the seminars, including failure to review the seminar materials.
