Consumer Protection And Investor Education: Programs
The largest population in the United States consists of people over the age of 65. Sadly, many seniors and "vulnerable adults" are targets of crimes ranging from telemarketing fraud to patient abuse in nursing home facilities. Accordingly, New Mexico Regulation and Licensing, Securities Division created an Elder Abuse Initiative to curb the number of crimes against vulnerable adults.
Five Ways Senior Citizens Can Protect Themselves from Fraud
If you are a senior citizen, you can avoid this kind of victimization by following six self-defense tips:
- Don’t be a courtesy victim
Older generations were taught to be courteous at all times, whether guests visit them in person or contact them by phone. Con artists often take advantage of these overly accommodating seniors, exploiting their good manners to get at their money. Remember, strangers who call and ask for your money should be regarded with the utmost caution. The best response is to hang up the phone.
- Check out strangers touting odd deals
Trusting strangers is a mistake that many seniors make when it comes to their personal finances. Don’t feel pressured by someone who asks you to make an immediate decision, giving you no chance to check out the salesperson, firm, and the investment opportunity itself. Instead, get written information about the investment, review it carefully, and make sure that you understand all the risks involved before you part with your hard-earned money.
A favorite tactic of telemarketing con artists is to develop false bonds of friendship. That’s because they know that many senior citizens are eager to have someone to talk to on the phone, even if the caller is a complete stranger.
When a telemarketer phones, do not be swayed by offers of unrelated advice and assistance—they are merely efforts to develop a sense of friendship and even dependency for one purpose only: to win your confidence and take your money.
Also keep in mind that almost all investment products must be registered. The Regulation and Licensing, Securities Division can tell you if the investment is registered or not. Remember that extensive background information on investment salespeople and firms is available to you.
- Never judge a person’s integrity by how they sound
Senior citizens who fall prey to a con artist often explain that the swindler sounded like such a nice person. Successful con artists sound professional and are able to make even the flimsiest investment deals sound as safe as putting money in the bank. They combine these sales pitches with extremely polite manners, knowing that many older people may equate good manners with personal integrity.
The sound of a voice, particularly on the other end of your telephone, has no bearing on the soundness of an investment opportunity.
- Watch out for salespeople who prey on your fears
Con artists play on older people’s concern that they will either outlive their savings or see all of their financial resources vanish overnight as the result of a catastrophic event, such as a costly hospitalization. Playing on these fears of running out of money, swindlers often pitch schemes as a way for the elderly to build up their life savings to allay fears of running out of money.
Remember, though, that fear, like greed, can cloud good judgment, and can leave victims of fraud mired in a terrible financial position.
- Don’t let embarrassment or fear keep you from reporting fraud or abuse
Some senior citizens fail to report that they have been victimized for fear that they will be judged incapable of handling their own affairs. Other seniors believe that their victimization will be viewed as grounds for forced institutionalization in a nursing home or other facility.
Con artists count on these sensitivities to prevent or delay the elderly from reporting the scam to authorities. While money lost to investment fraud is rarely recovered, there are also many cases in which older people discover that they have been misled about an investment in time to recover some or all of their funds.
If you fear you may have been victimized, don’t be embarrassed about contacting the New Mexico Regulation and Licensing Department, Securities Division (800) 704-5533.
Background: Elder Investment Fraud and Financial Exploitation
Senior citizens have long been the target of unscrupulous investment scam artists. This is especially true of seniors who have mild cognitive impairment (MCI). According to the 2010 Investor Protection Elder Fraud Survey released in June, 7.3 million older Americans - one out of every five citizens over the age of 65 - already have been victimized by a financial swindle. The IPT survey also found that half of older Americans exhibit one or more of the warning signs of current financial victimization. For example, more than one out three seniors (37 percent) are currently being pitched by "people (who) are calling me or mailing me asking for money, lotteries, and other schemes," while a much lower 19 percent of adult children believe that their parents are being pressured in such a fashion.
Of particular concern are seniors with mild cognitive impairment who can perform most daily functions, but have trouble or become confused with others, like following their medicine regimen and managing their finances. A 2008 Duke University study found that about 35 percent of the 25 million people over age 71 in the U.S. either have mild cognitive impairment or Alzheimer's disease. This makes them especially vulnerable to financial exploitation, including investment fraud. And researchers at the University of Alabama in Birmingham and University of Iowa have shown how older persons with cognitive impairment are more prone to make financial errors and willing to gamble with their money. In the earlier Texas pilot test, doctors taught by the Baylor College of Medicine team used the "red-flag" questions in the clinician's pocket guide to find and refer vulnerable older adults to help prevent fraud from occurring.
What is the Elder Investment Fraud and Financial Exploitation Prevention Program?
- The "Elder Investment Fraud and Financial Exploitation Prevention Program" will educate medical professionals who see older people in their practices about how to spot older Americans who may be particularly vulnerable to financial abuse and then to refer suspected investment fraud involving these at-risk patients to state securities regulators and/or to local Adult Protective Services (APS) professionals.
- A collaboration between the Baylor College of Medicine, IPT, IPI, National Adult Protective Services Association (NAPSA), and NASAA in cooperation with leading U.S. medical associations including the American Academy of Family Physicians, the National Area Health Education Center Organization and the National Association of Geriatric Education Centers at the national level and State Securities Regulators’ offices, Adult Protective Services (APS) offices and state chapters of the professional medical associations at the state and local level.
- The primary goal of the EIFFE Prevention Program is to train physicians, adult protective services professionals and senior caregivers to identify and assist those individuals at risk of elder investment fraud due to mild cognitive impairment.
How will the program work?
- Using the model that was piloted in Texas by Baylor, the EIFFE Prevention Program will utilize Continuing Medical Education (CME) trainings to educate medical professionals who routinely see older Americans as part of their practice about elder investment fraud, how to recognize it in their patients and to whom to report suspected fraud.
- Medical professionals will also be educated to look for vulnerability to investment fraud due to mild cognitive impairment among their senior patients and to refer those patients for further medical screening. This will help prevent elder investment fraud from occurring.
What are elder investor fraud risks?
- Persons with changes in the prefrontal cortex of the brain are less risk averse than age-matched persons without changes in the orbitofrontal cortex.
- Persons with MCI are four times more likely to make financial errors than those without this condition.
- Persons over age 71 (25,000,000 in the U.S.) who have MCI or full dementia number almost nine million (35%).
- Persons with Parkinson’s disease, diabetes, and other cerebrovascular disease also have an increase in being defrauded due these common medical conditions.
How will medical professionals be trained?
- The EIFFE Prevention Program will train medical professionals about elder investment fraud through Continuing Medical Education (CME) courses.
- All medical professionals are required to obtain ethics continuing medical education credits to maintain their licensure and or certification. EIFFE content fits into the category of medical ethics.
- Baylor is developing EIFFE state-specific CME courses for each of the participating states/jurisdictions and each of those CME courses is being accredited by the Texas Academy of Family Physicians.
- The PowerPoint presentations also include general investor education and protection information for the further edification of the medical professionals. This information will be presented by a representative of the state securities office or another qualified individual.
- CME courses will be delivered by presenters with medical credentials.
- Local medical association partners will be instrumental in reaching out to medical professionals to participate in the CME as well as event logistics such as location selection, invitations, marketing the events, etc.
- State securities regulators offices will also have the ability to participate in the state Geriatric Education Center (GEC) annual conferences.
How will Adult Protective Services Professionals be involved?
- APS professionals are an existing reporting channel for medical professionals who suspect that their patients are victims of elder abuse and neglect.
- Through the existing NASAA/NAPSA partnership, the EIFFE Project Team will identify APS professionals in each participating state to work with the state securities regulators office. The EIFFE Project Team will develop a webinar for APS professionals including PowerPoint presentation specifically focused on investor protection issues including fraud, reporting, outreach to medical professionals, etc.
How Swindlers Find Victims
Some of the ways that con artists find their victims include:
Free lunch, breakfast, and dinner seminars often help swindlers attract an audience of investors like you to gain information about your personal finances. Often, these seminars serve as a platform to initiate a relationship that builds trust and confidence in an educational setting that may be a ruse for a future high-pressure or targeted investment presentation.
Unsolicited Phone Calls
Although some investments promoted over the phone are legitimate, unsolicited phone calls are one of the most common means that fraud artists use to contact would-be victims. When in doubt, hang up the phone.
Con artists use both email and regular mail to make initial contact. However, they may insist on finalizing the deal by phone or in person in an effort to avoid postal regulators.
Internet Investment Schemes.
The Internet provides scam artists with countless opportunities to commit fraud. Chat rooms, blogs, and social media provide venues for swindlers to promote and perpetuate fraudulent schemes. These unscrupulous promoters use the Internet as a platform to conceal their identity, establish an electronic presence that creates a false sense of legitimacy, or advertise on a website to reach a large audience of potential customers.
Con artists may depend on word-of-mouth to perpetuate a fraud. Specifically, they may offer high rates of return on an investment, and then use their own money or investors’ funds to provide the initial investors with extraordinary returns. Through word-of-mouth and personal referrals, other people—including friends, neighbors, other family members, and church or community acquaintances—hear about the success of the venture, and in turn, invest their own funds.
Con artists sometimes use newspapers, magazines, financial publications, direct mail, and other media to attract their prospective victims and lure them into fraudulent investments and other schemes.
Con artists often target religious, ethnic, cultural, and professional groups. Some scammers may be members of the group, while others pretend to be members in order to gain trust and establish credibility. In many cases, investors become the victim of what turns out to be a Ponzi scheme.
Ways to Avoid Becoming a Victim of Fraud
No investment is risk-free, though scam artists will try to persuade you otherwise. In fact, generally the greater the potential for investment return, the greater the investment risk. Be wary of anyone who promises a rate of return better than what similar investments are paying or who “guarantees” the investment will not fail.
A con artist often gains the trust of investors by posing as an expert offering a complicated, difficult-to-understand investment. And while it can be hard to spot a swindler, you can help protect yourself by taking a few simple precautions.
Don’t Trust Strangers or Their Promises
- Be extremely cautious when strangers contact you by telephone, email, or in person, even if they claim to represent an organization or institution you know including the bank where you have an account. Never share your Social Security number or driver’s license number with them.
- Be wary of advertisements that give little or no information other than an 800-number, e-mail address, or website to contact sales representatives.
- Be skeptical about claims that an investment will yield extraordinary returns on your money in a short period of time. If the opportunity sounds too good to be true, it probably is.
- Beware of any financial professional who suggests putting your money into something you don’t understand or who urges you to leave everything in his or her hands.
- Never be pressured into making hasty investment decisions or commitments.
- Always refuse demands for an immediate decision. Some swindlers use high-pressure sales techniques that require immediate money commitments because “tomorrow will be too late.” Be especially wary if you are told that the offer is “just one of two remaining openings.” If in doubt, wait, and do more research.
- Never send money in response to a phone solicitation. If you are contacted over the phone, do not make an immediate decision. Instead, ask for written information about the firm, the salesperson, and the investment. If a salesperson hounds you using high pressure tactics, hang up the phone.
- Never, ever sign a blank form.
Be Inquisitive: Ask Questions and Check the Facts
Legitimate, registered investment companies and individuals will provide you with written materials that clearly explain the nature of the investment, the potential for loss, short and long-term tax implications, and any fees you will be charged, among other things. If the seller has little or no written information about the investment or its past performance, you should be extremely cautious and probably not invest with the seller at all. Don’t be embarrassed to ask about things that aren’t clear to you. Remember, no question is dumb or silly when you are deciding how to invest your hard-earned money.
Contact Trusted Sources for Help
Often, smooth-talking con artists will have answers to your questions. They may or may not be true answers. That’s why it’s important for you to do some further investigation.
Here’s what you should do:
When you need advice, consult third parties like your lawyer or accountant. Contact the New Mexico Regulation and Licensing Department, Securities Division by calling at (800) 704-5533 to find out if the company issuing the securities and the persons selling them are properly registered and have not violated the law. If the person or company isn’t registered or has a history of trouble with authorities, you should proceed with extreme caution, and the best approach is to walk away.