(Washington, D.C.) The position of the Securities Exchange Commission is one of a bulldog. Just as a life insurance policy is an umbrella of protection, so is the SEC the protection of fraud and other violations that border on unethical in the exchange of money Aging has become a business and Seniors are the next target for insurance risk. for promises.

Aging has become a business. The aging value and begin to take to heart all that will bequeath their wealth to the next generation. This natural desire for protection can be a risk factor for gullibility and vulnerability. The desire for protection creates a demand for insurance.

With the fiduciary responsibility over this protection comes responsibility. This is the attitude of the SEC as they monitor insurance products for the senior citizen population. The SEC makes an effort to require that the variable insurance industry provide products that meet the needs of investors and are sold in a manner that is forthright and honest.

Since there is enormous capital poured into this industry, there are a growing number of frauds and crimes targeted at the most "at risk" populations. Chairman Cox has made protecting senior citizens a priority. The Commission's ongoing initiative to protect senior citizens has several components, including educating older investors about investing wisely and avoiding scams, and using the Commission's examination and enforcement resources to root out problematic practices and prosecute fraudulent conduct that may harm older investors.

In August, the Commission held its second Seniors Summit in Washington, D.C. At this conference regulators, law enforcement officials, and community groups gathered to discuss how to protect older Americans from abusive sales practices and investment fraud.

Securities regulators announced the results of the "free lunch" investigation and the results were troubling as reported by the examination staff of collaborators, which included the Commission's staff, state securities regulators, and FINRA. The "free lunch" investigation examined the sales, disclosure, and supervisory practices of firms that sponsor "free lunch" sales seminars targeting senior citizens.

The regulators found that, despite the format of the seminars, 100% were sales presentations. They also found that 59% of the examinations reflected weak supervisory practices by firms, 50% uncovered exaggerated or misleading advertising claims, 23% found possibly unsuitable recommendations, and 13% uncovered possible fraudulent practices. The examiners found that among the most commonly discussed products at these sales seminars were variable annuities, equity-indexed annuities, and mutual funds.

The Division of Enforcement has taken an aggressive stance in combating fraud and uncovered 45 enforceable violations and scams including the following (general summary of each) against senior citizens:

^· A claim alleging that an adviser representative who fraudulently liquidated his elderly clients' securities holdings without their knowledge or consent by inducing clients to sign pre-printed, fill-in-the-blank forms.

^· A licensed insurance agent used the proceeds of the unauthorized sales to purchase equity-indexed annuities for which he received substantial, undisclosed commissions totaling about $2 million.

^· A case against a registered representative who recommended to his customers that they sell variable annuity contracts which were already owned so they could purchase new variable annuity contacts with higher principal amounts. The representative persuaded his customers to let him temporarily invest the proceeds from the sale of their existing variable annuity contracts but, instead of investing the money as promised, he submitted forged documents to the variable annuity companies to obtain the customers' contract proceeds, and misappropriated the money for his own use. The court enjoined the representative from further violations of the anti-fraud provisions of the federal securities laws, and ordered him to pay disgorgement, prejudgment interest and a civil penalty totaling $5.5 million. In a related criminal action, the representative pleaded guilty to mail fraud charges and was sentenced to more than 11 years in federal prison.

^· The SEC obtained a preliminary injunction against the principal of an advisory firm, the firm itself, and a related company he operated who targeted primarily elderly investors and advised them to surrender existing variable annuity policies, mortgage their residences, and transfer the proceeds to his companies for him to manage. According to the complaint, he misrepresented to investors that the investments would pay a 12–15% guaranteed return and that he would pay their mortgages and would accrue in the investor's account any investment returns in excess of the amount necessary to pay the investor's mortgage. Rather than using investors' money as promised, the principal failed to make their mortgage payments, and misappropriated their money for his own benefit.

^· A settlement against MetLife for failing to reasonably supervise a registered representative who defrauded the Fulton County, Georgia, Sheriff's Office by investing $2 million of the Office's money with an entity the representative falsely stated was an affiliate of MetLife, but was actually a company with ties to the representative. In connection with this conduct, the representative pleaded guilty to criminal wire fraud charges in federal court and is currently serving a 30-month prison term. The Commission found that the registered representative induced the Sheriff's Office to purchase a $5.2 million MetLife variable annuity by misrepresenting to the Sheriff's Office that the annuity was a permissible investment for the Office under Georgia state law. Further the SEC found that MetLife failed reasonably to supervise the representative. In particular, the SEC claimed that the MetLife was aware of compliance concerns about the representative from the time he was hired, yet failed to implement heightened supervisory procedures for him and, in fact, allowed him to work from a "detached location" despite continuing compliance concerns and red flags regarding the representative's conduct.

There is also growing concern about the sales practice and suitability issues that may arise in the sale and exchange of