Regulators to Speed Probes Of Defrauded Investors

Regulatory investigations of cases involving possible fraud against senior investors have moved into the fast lane.

Examinations and enforcement actions in cases involving older investors will receive top priority, according to the Financial Industry Regulatory Authority.

This is part of an attempt by Finra to bring cases — and also restitutions — as quickly as possible.

Teams looking into cases in which seniors may be involved have four months to complete their investigations, says Susan Merrill, Finra’s enforcement chief. If examiners find wrongdoing, cases referred to the enforcement division will be moved to the top of the queue.

Advocates for senior investors praised the news. Finra’s policy demonstrates that it “really want[s] to make sure older investors feel safe,” said Jean Setzfand, director of financial security for AARP, an advocacy group for older Americans. “When it comes to investment fraud, for an older investor it is catastrophic,” she said, “so timing is of the essence.”

In the past, cases have taken anywhere from several months to a few years because of the varying facts and circumstances of specific cases as well as motions, postponements and other delays that can slow the process.

The move to speed investigations is another attempt by regulators to protect older investors who could fall victim to certain unscrupulous financial advisers.

The vast sums of cash that retiring baby boomers and other older investors have available make them a target.

Cases in which seniors are duped out of savings or investments have become more common. Amid the shift from company pension plans to self-funded retirement accounts, losses resulting from unsavory business practices can make it difficult for seniors to support themselves.

Regulators are focusing on “free-lunch” seminars, in which advisers target large groups of potential investors for high-pressure sales talks, and on the use of credentials that falsely create the impression an adviser is trained to work with older clients.

Instances of fraud “will continue to increase as investors become more responsible for their own assets,” Ms. Setzfand says. Also, elderly investors who are unable to supervise the actions of their advisers, because of advanced age or medical problems, could fall prey to someone they believe to be trustworthy.

In February, Finra brought charges that could bring enforcement actions against brokers John Mullins and his wife, Kathleen Mullins, for allegedly misappropriating almost $400,000 from 97-year-old widow Esther Weil and her charitable foundation.

According to Finra, John Mullins served as the victim’s financial adviser for more than 20 years and assumed power of attorney over her assets in 2000. Mr. Mullins allegedly used Ms. Weil’s account and her charitable trust to pay down $375,000 in a mortgage credit-line account, spent $4,653 on groceries and $11,264 at restaurants and purchased gift certificates totaling $4,000 for a stay at the Four Seasons hotel in London.

The money was returned to Esther Weil and her foundation.

Finra moved the case forward swiftly, but Ms. Weil died while the matter was being pursued.

Attorneys for John and Kathleen Mullins weren’t immediately available for comment.

Fast-tracking investigations will likely raise the priority level for senior issues among broker-dealers as well, according to Stuart Meissner, a lawyer who works with seniors in arbitration claims.

“If the firms know that these cases will in fact be expedited, they’ll have to pay more attention to them,” he said.