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John Christopher Huck is not who he pretends to be, authorities say. A complaint filed against him by the Massachusetts Securities Division in June 2006 alleges that the insurance and annuities salesman fraudulently posed as an investment advisor with specialized expertise in advising the elderly. Although he's not licensed as an investment advisor representative (IAR), Huck used a Certified Senior

John Christopher Huck is not who he pretends to be, authorities say. A complaint filed against him by the Massachusetts Securities Division in June 2006 alleges that the insurance and annuities salesman fraudulently posed as an investment advisor with specialized expertise in advising the elderly. Although he's not licensed as an investment advisor representative (IAR), Huck used a Certified Senior Advisor (CSA) designation to attract senior clients and then offered them advice about their risk profiles and about whether securities or other investments would be more appropriate. Even so, he inevitably sold them high-commission (and often unsuitable) products — such as equity-indexed annuities that lock up funds for several years. In 2004 alone, he said he collected over $200,000 in commissions for himself on these high-commission products, according to his own testimony. Huck typically encouraged the seniors to sell other securities and assets to fund the annuities purchases, according to the complaint. (Huck denies the charges.)

In December 2005, a 72-year-old Massachusetts woman scheduled a meeting with Huck after attending one of his many free seminars, billed as “Senior Financial Workshops” or “Senior Financial Survival Workshops,” the complaint says. Huck allegedly criticized specific mutual funds the client owned and recommended she sell the funds, among other assets, in order to pay for the purchase of an equity-indexed annuity. Before agreeing to Huck's advice, the elderly client actually called the Society of Certified Senior Advisors, who issued Huck's designation, to make sure he checked out. When the society told her “it had no problem with him,” the elderly client purchased the annuities Huck offered. She would later call the division to say she did not understand how the product worked and that Huck had not explained the surrender fees and the 10-year lock-up period to her.

Huck's case is the kind of thing that is driving state securities regulators to wage a new war against senior designations — part of an effort to stamp out senior fraud. NASD Rule 2210 has long stipulated that you can't misrepresent yourself or the services or products you sell to the investing public in marketing communications or otherwise. But, apparently, state regulators think that rule's not enough and are moving to ban certain designations from marketing materials. Seniors are too easily duped; there are so many designations out there that it's difficult to tell which ones have merit. And even when they do have merit, the issuing organizations don't always monitor their designees. The result: Advisors using senior designations to con seniors are often caught too late.

Jack Herstein, assistant director at the Nebraska Department of Banking and Finance, says some advisors and insurance agents simply buy designations that use “catch words” — like elderly planning specialist or retiree analyst — on the Internet. Some of them do not require studying any material, taking any test or proving any kind of expertise or qualification. They then use the designations to lure seniors to “free lunch seminars,” where they try to sell them high-commission products.

According to the NASD Web site, the CSA designation used by Huck does not have any prerequisites, nor does it require any experience. But, before receiving the designation, an individual must take a closed-book exam and score 70 percent or better. The designee can prepare for the test on his own or take a three-day course. The group also requires a designee to obtain 18 CSA credits every three years through ethics courses or by volunteering for seniors.

At the time Huck was posing as an investment advisor, he was actually registered as a broker/dealer agent of Investors Capital Corp. and had passed the Series 6 and Series 63 examinations. Although he also operated Huck Financial Strategies, he was never registered in Massachusetts as an investment advisor or IAR, according to the complaint.

Huck used his CSA designation for almost two years before it was revoked by the Society of Certified Senior Advisors in response to a complaint by the Massachusetts Securities Division. Now Huck simply proclaims himself a “senior advisor” to clients, the division says.

Huck's lawyer, Michael Unger, says he is hoping to reach a resolution with the Massachusetts Security Division, but he doesn't believe Huck did any wrong. “There is no basis for the complaint. Just because you're a regulator and don't like [a designation] doesn't mean you can create a case against someone and damage his reputation,” he says.

Getting Tough

In November of last year, Nebraska's Department of Banking and Finance sent a “special notice” to all of its b/ds, their reps and all federally covered and state registered investment advisors (RIAs) and their IARs requesting that, as of Jan. 1, 2007, firms prohibit the use of all professional designations that imply special knowledge of the needs of elderly investors. The request asks that the firms prohibit the designations in all mass mailings, advertising, business cards and letterheads.

In the meantime, Nebraska's banking department is in the midst of developing a list of legitimate designations exempt from the prohibition. The process asks organizations that issue the designations to submit information on what kind of experience, education, exam, continuing education and code of ethics are required, and whether there are any repercussions if any of these requirements are violated.

So far, the Nebraska banking department has received a little over a dozen applications from issuing organizations and has approved eight for its list of authorized designations. (See table at left.) Herstein says building the list will be an ongoing process. The department will issue an interpretive opinion about the approved designation list by the end of this summer. It might also consider implementing the approved designations as a state rule some time before the end of 2008, he says.

In Massachusetts, the Secretary of the Commonwealth, William Francis Galvin went ahead and proposed regulations to prohibit certain designations last fall. Massachusetts' proposed regulations are expected to take effect April 27 and would exempt from prohibition designations earned through a “meaningful education or training process encompassing sufficient course work, examinations and experience.” Designations also have to be accredited by nationally recognized independent accrediting organizations, like the National Commission for Certifying Agencies or the America National Standards Institute/International.

The Downside

Some think the state securities regulators are meddling and that banning the use of certain designations will just end up hurting legitimate business people and firms. Herstein says he's already received at least one phone call from a rep irritated with the Nebraska department's request. “His compliance officer enforced our request, and the agent was unhappy because he was unable to use the listed designations,” he says.

Meanwhile, one designation issuer says it has unfairly gotten caught in the crossfire: the Association of Chartered Senior Financial Planners, the Centennial, Colo.-based organization that issues the Chartered Senior Financial Planner (CSFP) designation. At first glance, you might think that a Chartered Senior Financial Planner would be someone with specialized knowledge of the financial needs of seniors — just the kind of designation that the state regulators are targeting. But the organization says its use of the word senior is meant to refer to advanced-level retirement and asset-protection strategies used by those who hold the designation, not to the advanced age of target clients. “We are lumped into the guilty category right away,” says Stewart Davidson, president of the ACSFP Advisory Board.

Today, some 1,000 reps, attorneys and CPAs hold the CSFP designation. Although the group is based in Colorado, individuals in any state can hold its designation, so the group has submitted its designation to the Nebraska Securities Department for approval. It hasn't heard back yet.

Meanwhile, the Financial Services Institute (FSI), an advocacy organization for independent b/ds, and the Securities Industry Financial Markets Association (SIFMA, formerly SIA) worry that the proposals might further complicate the regulatory environment.

In comments on Galvin's proposed rule concerning designations last year, the FSI pointed out that if more than one state develops its own regulations on the matter, advisors advertising in multiple states would incur increased costs and separate regulatory burdens for each. Indeed, it could be argued that the states should leave such rules in the hands of the NASD and SEC, which could adopt a uniform rule that applies to all states.

At this point, neither the NASD nor the SEC has any specific rules on advisor designations. The NASD Web site simply posts a searchable list of 70 advisor designations, as well as information about their prerequisites. John Gannon, senior vice president of the Office of Investor Education at the NASD, says that while the regulator is concerned about the proliferation of advisor designations, it is satisfied with its current approach. “We have a database so people can make a judgment themselves to determine if a designation adds any value.”

The NASD and the SEC, for their part, have made strides in the last year in recognizing the problem surrounding senior fraud. Last summer, the SEC held its first ever “Senior Summit” to discuss senior investment fraud. The SEC says it's also concerned with products like variable and equity-indexed annuities being sold to seniors at the “free lunch seminars.”

Meanwhile, the North American Securities Administrators Association (NASAA) has recently developed a committee to come up with one uniform rule for all states to adopt. Jim Nelson, member of NASAA's board of directors, is heading up that committee and says, much like Massachusetts, he'd like the committee to develop a list of approved designations through national accrediting agencies.

His team has gone undercover to witness the “free lunch seminars” firsthand. “It's our experience that investors give greater credit to people when they say, ‘I'm a certified elder planning specialist, and I have this book I wrote about it,’” he says. Meanwhile, both the designation and the book are typically nothing more than marketing tools, he says. The books themselves can be purchased on the Internet: about $2,500 for 25 copies, he says. “But the reaction is that investors put great trust in this person, and they think he has special expertise.”


Nebraska's Department of Banking and Finance has, so far, approved eight designations for its list of authorized titles.

Certified Financial Planner (CFP)

Chartered Financial Consultant (ChFC)

Personal Financial Specialist (PFS)

Chartered Financial Analyst (CFA)

Chartered Investment Counselor (CIC)

Chartered Life Underwriter (CLU)

Life Underwriter Training Council Fellow (LUTCF)

Financial Service Specialist (FSS)

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