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While elder fraud, breach of fiduciary duty and other types of financial abuse can take on many forms, there are a number of methods and investments which increasingly have been used in illegitimate schemes to defraud older investors.High Pressure Sales Seminars
In the fraudulent sales seminar scheme, an investment adviser(s), sometimes licensed and sometimes not, will lure investors to attend sales seminars, sometimes at fancy hotels and restaurants, with promises of a free lunch. While these sales seminars may be perfectly fine and may provide a free meal, the fact is that sometimes they are used to pitch unsuitable products, using high pressure sales tactics. Investors should remain skeptical of any high pressure sales tactics and should not be immediately lured into making an investment decision on the spot. Investors should always take the time away from the sales seminar to make an objective investment decision and to seek out third party advice.
In addition to investigating the proposed investment, the attendee should perform due diligence on the investment advisor.
Specifically, people or firms that get paid to give advice about investing in securities generally must register with either the SEC or the state securities agency where they have their principal place of business. As discussed in greater detail below, the rules governing the registration of certain investment advisers have changed.
On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd- Frank Act”) was signed into law. The Dodd-Frank Act amends certain provisions of the Investment Advisers Act of 1940 by delegating generally to the states responsibility over certain mid-sized investment advisers i.e., those that have between $25 million and $100 million of assets under management (“AUM”).
The Dodd-Frank Act and SEC rules increased the threshold above which all investment advisers must register with the SEC from $30 million to $110 million of AUM. Prior to July 2011, an investment adviser regulated by the state in which it maintained its principal office and place of business generally was prohibited from registering with the SEC unless the adviser had at least $25 million of AUM, and was required to register with the SEC once it had at least $30 million of AUM. Now, investment advisers with less than $110 million of AUM may be prohibited from registering with the SEC, depending on the size of the adviser’s AUM and whether the adviser meets other requirements.
This means that state securities authorities will have primary regulatory authority over a substantial number of investment advisers that previously were subject to primary regulation by the SEC. Larger investment advisers, generally, those with over $100 million of AUM, will continue to be registered with the SEC and will be subject to federal regulation (state investment adviser laws requiring registration, licensing, and qualification have been preempted for these advisers).
Some investment advisers employ investment adviser representatives, the people who actually work with clients. In most cases, these people must be licensed or registered with your state securities regulator to do business with you. So be sure to check them out with your state securities regulator.
To find out about an investment adviser and whether it is properly registered, read its registration form, called “Form ADV.” Form ADV has two parts. Part 1 contains information about the adviser’s business and whether the adviser has had problems with regulators or clients. Part 2 sets out the minimum requirements for a written disclosure statement, commonly referred to as the “brochure,” which advisers must provide to prospective clients initially and to existing clients annually. The brochure describes, in a narrative format, the adviser’s business practices, fees, conflicts of interest, and disciplinary information. Before you hire an investment adviser, always ask for and carefully read both parts of the Form ADV.
Where applicable, each brochure provided to clients must be accompanied by a “brochure supplement” that includes information about the specific individuals, acting on behalf of the adviser, who actually provide investment advice and interact with the client. An adviser must deliver the brochure supplement to the client before or at the time that the specific individual begins to provide investment advice to the client.
You can view an adviser’s most recent Form ADV online by visiting the Investment Adviser Public Disclosure (IAPD) website. You can also obtain copies of Form ADV for individual advisers and firms from the investment adviser, your state securities regulator, or the SEC, depending on the size of the adviser. You’ll find contact information for your state securities regulator on the website of the North American Securities Administrators Association.
If the investment adviser is registered with the SEC, you can get a copy of Form ADV (Part 1 only) by accessing information on “How to Request Public Documents” at SEC Website. In addition, at the SEC’s headquarters, you can visit the SEC’s Public Reference Room from 10:00 a.m. to 3:00 p.m. to obtain copies of SEC records and documents.
Because some investment advisers and their representatives are also brokers, you may want to check both BrokerCheck and Form ADV.Contact Us
With extensive courtroom, arbitration and mediation experience and an in-depth understanding of elder financial abuse and securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.