If a recently introduced U.S. Senate bill successfully makes its way to law, investment advisors may be subject to a new layer of scrutiny when dealing with senior investors.
The Senior Investor Protection Act of 2008 (SIPA), introduced by Sen. Herb Kohl, D-WI., chairman of the U.S. Senate Special Committee on Aging, and Sen. David Vitter, R-LA, offers the resources necessary to protect seniors from unscrupulous financial advisors who prey on the retirement savings of the elderly by touting misleading or fraudulent senior designations.
SIPA would create a new grant program that encourages state regulators to adopt a uniform standard for the accreditation of senior financial advisors, and it would assist states in their efforts to protect seniors who are exposed to potentially fraudulent designations.
SIPA is a response to the Aging Committee's September 2007 hearing, which examined questionable practices used by so-called senior financial investment specialists in order to gain access to the retirement savings of older Americans.
The investigation revealed that many of the designations represent limited or no value with respect toward advising seniors on financial matters and that often these designations are obtained simply by attending a weekend seminar and passing an open-book, multiple choice test.
In many cases, state licensing requirements for investment advisors were found to be far less stringent than those needed to practice in other professions.
The bill's authors felt that it was time to provide the states with the resources needed to enact more stringent laws.
The bill provides the states with incentives to improve their own rules regarding the use of designations by encouraging them to adopt provisions outlined in the North American Securities Administrators Association's (NASAA) new model rule on the use of senior designations announced during that organization's recent national public policy conference.
SIPA also calls on the investment and insurance industries to be part of the solution. The National Association of Insurance Commissioners will work with NASAA to develop improved senior designation rules and suitability standards for insurance products such as deferred variable annuities, which may be inappropriately sold to seniors.
Grants provided by the legislation are designed to give states the flexibility to use funds for a wide variety of senior investor protection efforts. The legislation has been endorsed by NASAA, The American College, and the Financial Planning Association.
