FINRA, the North American Securities Administrators Association (or "NASAA") and SEC Office of Investor Education and Advocacy (or "OEIA") staff (collectively, "the agencies") provided joint guidance as to the heightened risk of financial exploitation associated with social isolation. The agencies explained that, as individuals, particularly seniors, become increasingly socially isolated (whether voluntarily or involuntarily, as the result of quarantines), they may increasingly rely on the Internet for social interactions. The agencies cited research indicating that increased reliance on the Internet as a result of social isolation renders affected individuals more susceptible to financial abuse and fraud victimization.
The agencies provided the following tips to investors for avoiding fraud:
- seeking advice from trusted entities and conducting additional research prior to making an investment;
- being aware of common indicators of senior exploitation, such as (i) new overly protective friends or caregivers, (ii) providing financial account passwords or the control of finances to new friends or partners, (iii) the emerging reluctance to discuss financial matters or (iv) sudden or unexplained shifts in spending habits or beneficiary designations;
- identifying red flags of fraud, including (i) unregistered or unlicensed sellers, (ii) promises of a high rate of return without risk, (iii) the pressure to invest quickly and (iv) financial professionals with questionable backgrounds (e.g., with personal bankruptcies, terminations, federal tax liens, a large number of customer complaints, etc.); and
- maintaining communication with socially isolated individuals, informing them of common scams and red flags for fraud, and contacting state securities regulators if suspicious of possible senior financial exploitation.
Primary Sources
- FINRA Investor Insights: Social Isolation and the Risk of Investment Fraud
- NASAA Investor Advisory: Social Isolation and the Risk of Investment Fraud
- SEC OIEA Investor Alert: Social Isolation and the Risk of Investment Fraud
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
