Investment scams on the rise among boomers

senior couple listening to presentation
  • The number of enforcement actions involving senior scams doubled from 2009 to 2010.
  • Boomers and older seniors are targets because they have accumulated wealth.
  • Web tools can be used to check out securities and the backgrounds of hucksters.

Con artists are targeting the life savings of baby boomers and older seniors in a wave of investment scams.

State securities regulators are reporting a surge of investment fraud against investors ages 50 and older, according to the North American Securities Administrators Association, a voluntary association of state securities agencies responsible for grass-roots investor protection.

"The reason they're targeting seniors is pretty simple," says Matt Kitzi, Missouri's securities administrator and chairman of NASAA's enforcement committee. "The seniors are the segment of the population that have managed to save and accrue the most investments. Bad guys, crooks and hucksters are going to follow the money. And seniors have had a lifetime to accrue investments and funds."

In 2010, state securities regulators launched 1,241 enforcement actions, including criminal complaints and cease-and-desist orders, involving investors ages 50 or older, according to NASAA. That was more than double the 506 cases in 2009.

And state securities regulators expect the surge in fraud targeting investors ages 50 and older to continue. With more than 76 million baby boomers approaching retirement age, con artists have a large pool of potential targets. The oldest baby boomers turned 65 in 2011.

"We've always seen senior fraud," says Patricia Struck, administrator of the division of securities with the Wisconsin Department of Financial Institutions. "It's not anything new. It's the volume. There are just more older people as baby boomers hit retirement age."

And baby boomers and older seniors who suffered big losses in their investment accounts during the financial crisis are looking for ways to bolster their retirement savings.

"There's a genuine fear they will outlive their money because they lost a considerable chunk of it," says Bob Webster, director of communications for NASAA.

"They may be a little more willing to listen to a fraudulent pitch that promises to provide enough money for the rest of their lives."

Unregistered securities

Unregistered securities in the form of promissory notes, private offerings or investment contracts are the most common product used in senior abuse cases, according to an enforcement report from NASAA. Senior abuse cases involving unregistered securities outnumber cases involving "traditional securities" by 5 to 1.

"Most of the fraud that we see is conducted by people who don't have proper licensing and sell unregistered securities," Webster says.

Promissory notes marketed to individual investors are a popular type of unregistered security pitched to seniors by con artists, says Lori Schock, director of the Securities and Exchange Commission's office of investor education and advocacy.

"It's an outright fraud," Schock says. "Generally speaking, promissory notes aren't sold to individual investors."

Affinity fraud

Other types of investment scams include affinity fraud, where con artists infiltrate a senior club or organization, create a bond with seniors and then pitch a fraudulent investment.

"Affinity fraud is a big issue that crops up quite a bit in church groups, senior centers, social networking and veterans associations," Kitzi says.


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