Cecily O'Connor
RedwoodAge.com

As 77 million boomers drift towards retirement, regulators are trying harder to shield them from scams.

Legislators and the Securities and Exchange Commission proposed separate measures to protect older adults from investment fraud. Meanwhile, two online resources from the Financial Industry Regulatory Authority (FINRA) and the International Foundation of Employee Benefit Plans may help employers increase their oversight and give their older workers more tools to steer clear of fraudulent early retirement pitches.

Boomer investors, the oldest of whom turned 62 this year, face difficult decisions on how to stretch their savings throughout their retirement. They are increasingly offered investment tools such as reverse mortgages and annuities. While these products can be valuable, they are also turning up in scams.

"After helping employees lay the groundwork for financial independence in retirement through company-sponsored plans, companies don't want to unwittingly help scamsters lure their employees into an early - and financially perilous - retirement," said Mary Schapiro, chief executive officer at FINRA. "While many third-party seminars offer solid information, others - especially those that promote early retirement - may include misleading, even fraudulent promises of big financial returns and the dream of a comfortable, but ultimately unsustainable, retirement lifestyle."

Senators Bob Casey (D-Pennsylvania) and Herb Kohl (D-Wisconsin) introduced The Senior Investor Protections Enhancement Act  last week to increase penalties for those who commit securities violations against people who over 62. 

“Everyday, older Americans are targeted for investment scams and they see their life savings go down the drain” said Casey.

Increasing Penalties
The bill would increase penalties for those who sell seniors products that are unsuitable for their age, fail to disclose fees and/or lock-ups of cash or large penalty charges. In the legislation, seniors are defined as adults aged 62 or older, which is the age at which most retirement savings become available for use and investment.

Penalties for existing securities violations could include an additional $50,000 civil fine for each violation that targets a senior. The bill wouldn't interfere, however, with legitimate investment advisors who recommend products and investments appropriate for their clients.

“Many seniors are discovering that their life savings may not be enough to last them throughout their retirement," Kohl said. "As they turn to investments to bridge the gap, seniors need to know that they can trust the people who handle their money."

As part of stepping up protections, annuities linked to equity indexes may be overseen by federal securities regulators under a rule proposed by the SEC. Equity indexed annuities are often sold to seniors, for whom they may be unsuitable investments due to substantial early surrender charges that lock up assets for many years.

Pre-retirees can check out the FINRA online resource mentioned above, which alerts workers to the pitfalls of seminars that promise big investment returns. The employer resource offers tips on how to evaluate the financial professionals involved in early retirement seminars and the seminar materials such as invitations, slides, handouts and scripts.