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State Regulators, AARP Warn Seniors to Be on the Lookout for Investment Fraud

9/4/2003

CONTACT: Tami Torres
850-413-2842

TALLAHASSEE- State and federal regulators are teaming up with AARP to alert seniors to the dangers of investment fraud, especially during tough economic times.

"Unsteady stock markets, record low interest rates and rising health care costs are combining to create a perfect storm for investment fraud against senior investors," warned Florida's Chief Financial Officer Tom Gallagher. "A well-informed senior is much less vulnerable to fraud and abuse."


State regulators say older investors are being targeted with increasingly complex investment scams involving unregistered securities, promissory notes, charitable gift annuities, viatical settlements, and Ponzi schemes all promising inflated returns.

"Scam artists know that seniors and others living on fixed incomes are being squeezed in the current financial environment," said Don Saxon, director of the Office of Financial Regulation. "Their products and pitches sound tempting to many seniors who've seen their retirement accounts dwindle in recent years and don't have the benefit of time to recoup their losses."

"Over the past few years, many people over 50 lost money in the stock market that represented a lifetime of savings. These people, who are desperate to recapture lost income, may make desperate decisions, making them easy targets for fraud," said Lyn Bodiford, State Affairs Coordinator of Florida AARP.

In South Florida, two seniors invested in what were presented as high-yield mutual funds and "blue chip" stock, both bogus investments. One senior, who took out a $250,000 mortgage to invest, lost her home and is now living with her daughter. The other senior, who lost $150,000 in the scam, has had to heavily mortgage his home, which he at one time owned free and clear. Both seniors are struggling to make ends meet.

"Don't put everything you have worked hard for your entire life at risk for a quick, get-rich scheme," said Gallagher.

Saxon is urging seniors to report information quickly to state regulators if they have been victimized. "Every day that financial fraud goes unreported is another day that criminals can steal retirement savings from unsuspecting seniors," he said.

Florida seniors can contact the Department of Financial Services toll-free at (800) 342-2762 and get help with questions about an investment.

Seniors also can learn more about the dangers of investment fraud by visiting the National American Securities Administers Association's online Senior Investor Resource Center at www.nasaa.org . The website offers a checklist of questions seniors can ask before making an investment decision, common sense solutions to protect your nest egg from investment fraud, information about the top frauds targeting seniors, and links to a variety of investor education publications and programs.

Gallagher offered the following tips to help seniors protect their retirement assets:

§ Don't be a courtesy victim. Con artists will not hesitate to exploit your good manners. Save your good manners for friends and family members, not strangers looking for a quick buck!

§ Check out strangers touting strange deals. Extensive background information on investment salespeople and firms is available from the Central Registration Depository (CRD) files available from state regulators.

§ Always stay in charge of your money. Beware of anyone who suggests putting your money into something you don't understand.

§ Don't judge a book by its cover. Successful con artists sound and look extremely professional and have the ability to make even the flimsiest investment deal sound safe.

§ Watch out for salespeople who prey on your fears. Con artists know that you worry about outliving your savings. Fear can cloud your good judgment. An investment that is right for you will make sense because you understand it and feel comfortable with the risk involved.

§ Don't make a tragedy worse with rash financial decisions. The death or hospitalization of a spouse has many sad consequences - financial fraud shouldn't be one of them. If you find yourself suddenly in charge of the finances, get the facts before you make any decisions.

§ Monitor your investments and ask tough questions. Keep an eye on the progress of your investment. Insist on regular written and oral reports. Look for signs of excessive or unauthorized trading of your funds. If you are stalled when you want to pull out your principal or profits from an investment, you may have uncovered someone who wants to cheat you.

§ Don't let embarrassment or fear keep you from reporting investment fraud or abuse. Con artists know that you might hesitate to report that you have been victimized in financial schemes out of embarrassment or fear. Every day that you delay reporting fraud is one more day that the con artist is spending your money and finding new victims.