This week Massachusetts fired a round in the new regulatory war waged by state securities regulators against the use of senior designations to commit senior fraud. The Massachusetts State Securities Division adopted the nation’s first regulation requiring advisors to advertise only accredited credentials, or credentials that can clearly demonstrate that they call for meaningful expertise, when offering financial advice to elderly clients.
The rule, which goes into effect June 1, requires advisors to have their “senior designations” accredited by nationally recognized independent accrediting organizations, such as the National Commission for Certifying Agencies or the America National Standards Institute/International. Exempt from the prohibition are designations earned through a “meaningful education or training process encompassing sufficient course work, examinations and experience.”

The Secretary of the Commonwealth of Massachusetts, William Gavin, launched efforts against fraudulent advisor designations following a number of cases against advisors who used “bogus titles” to woo seniors. The seniors were targeted with clever marketing schemes and their assets were placed in unsuitable investments.

“The Securities Division of my office has seen a number of instances in which older investors have been duped into buying unsuitable investments by self-proclaimed senior financial advisers who are, in reality, salesmen for one specific instrument, such as an equity indexed annuity,” Galvin said. “The salesmen have used impressive sounding but often meaningless credentials to gain legitimacy with their clients.” (Click here to read more about the regulations).

Massachusetts isn’t the only state taking action. In November, 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.

In the meantime, Nebraska officials have taken it upon themselves to develop a list of acceptable senior designations. Issuing organizations are asked to submit information regarding the kinds of experience, education, exams, continuing education and codes of ethics that are required to earn that designation, and whether there are any repercussions if any of these requirements are violated.
(Click here to read more about the crackdown on senior designations).