Rulebook
Regulators Target Use of Seminars, Designations

Regulators Target Use of Seminars, Designations

State and federal securities regulators are targeting advisors who market “free lunch” seminars and use misleading senior investor designations, drawing a correlation between these strategies and problematic behavior.

During SIFMA’s annual senior investor forum on Tuesday, representatives from the Securities and Exchange Commission, the Financial Industry Regulatory Authority and the North American Securities Administrators Association cited the so-called “free lunch seminars” and the increasing use of senior designations as areas of concern and the basis for potential examination.

Many free meal seminars are designed to solicit seniors with a gourmet meal at an upscale restaurant and promise education around investments where income will be “guaranteed.” But in some instances, these seminars are put on by unscrupulous—and at times, unlicensed—reps peddling products that are often grossly unsuitable for senior investors, regulators say.

“I'm not suggesting anything wrong on its face, but there is undeniable correlation between conducting those [seminars] and higher incidents of problematic behavior,” Kevin W. Goodman national associate director with the SEC’s office of broker-dealer examinations, said Tuesday.

Professional “senior specialist” designations implying that the holders have expertise in helping seniors are also problematic, says Joseph Borg, director of the Alabama Securities Commission and a board member of NASAA’s senior issues and diminished capacity committee.

The problem with advisors using senior designations is like the free lunch seminars, Goodman says. “There's nothing in and of itself wrong with using a senior designation, but when they start to really exaggerate what it means to have that credential, that's got a huge correlation with problematic behavior and so we use those to target particular registered reps for examinations,” he says.

FINRA also focuses on the use of senior designations, says Ann-Marie Mason, FINRA’s director & counsel of shared services, litigation and policy. “Folks just don't understand it. They don't know what it means, there is no common nomenclature and no common educational requirement around any of these things,” she says.

“The more impressive sounding the designation and the less tied it is to actual education or accomplishments, the more problems we see associated with the people who used those,” Goodman added.

In a number of states, the use of fraudulent designations or those certifications with no basis is actually a violation of state securities laws, Borg says. “For example, if we find a CHSG (certified high school graduate) designation, or something like that, it's going to trigger a regulatory inquiry,” he says, adding that he’s seen the more questionable certifications or designations used among smaller brokers, the RIA channel and by non-licensed individuals. 

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