Investment Fraud Lawyer Blog

Sales pitches often misrepresent and fail to disclose important facts about equity-indexed annuities, according to Mel Lindauer in his August 13, 2010 Forbes article, “The Truth About Equity-Indexed Annuities.”

Despite claims that they are simple, equity-indexed annuities are so complex that most people who sell them have an insufficient understanding of how they operate, according to the article.

Continue reading "Forbes Magazine Warns Investors about Equity-Indexed Annuities" »

Buried in the 2,300 pages of the new Dodd-Frank Financial Reform Act is a provision called Section 922 that provides for substantial financial rewards for any person who provides “original information” to the SEC that leads to a successful enforcement action relating to the violation of federal securities laws. The whistleblower may be an investor, an employee or other industry insider, or any other member of the public not employed by a law enforcement or regulatory agency. If the whistleblower’s tip leads to a monetary sanction of over $1 million, the whistleblower will be entitled to between 10% and 30% of the amount recovered by the SEC. The new law also provides whistleblowers with legal protection from retaliation, giving them the right to sue for damages if they lose their jobs or are blackballed by the industry. Together, these new provisions provide a powerful incentive for investors and financial professionals to report misconduct in the securities industry, which will hopefully have the long-term effect of deterring fraud and other abuses.

Continue reading "New Law Provides Big Rewards for Securities Fraud Whistleblowers" »

It is no surprise that retirees are often the targets of investment scams. But it is a surprise that the scammers are often empathy-challenged senior citizens themselves, and that is surprising. Attorneys and advocates for the elderly are reporting an increase in the number of elder scams perpetrated people their age, according to an article in Bloomberg BusinessWeek, “Senior Swindlers: A Sucker Retires Every Minute.”

Continue reading "Senior Citizens are Increasingly Targeted by Swindlers Who are Often Senior Citizens" »

A recent USA today article highlights the fact that investment scams usually increase when there is an economic downturn. The article refers to The North American Securities Administrators Association’s recently released list of Top 10 Investor Traps: The list and discussion points, which are located at http://www.nasaa.org/nasaa_newsroom/current_nasaa_headlines/13048.cfm are as follows:

Continue reading "NASAA's Top Ten Investment Scams for 2010" »

Financial abuse of elderly people is increasing as more seniors are being lured into investments that are unsuitable (inappropriate) or outright frauds.

According to recent articles in InvestmentNews and Bloomberg, one out of every five Americans older than 65 has been the victim of a financial scam. This means that more than 7.3 million seniors have been taken advantage of financially. New York-based insurer MetLife estimates the total costs of elder fraud comes to more than $2.6 billion a year. One of the reasons for the trend is the significant number of elderly individuals who have significant wealth and who may be suffering from some degree if cognitive difficulties.

Continue reading "Financial Abuse of the Elderly has become a Growth Business" »

In today’s low-interest-rate environment and with investors rightly suspicious of stock and bond investments, investment scams are flourishing. Investors should pay attention to the warnings of state securities regulators, whose list of Top 10 Investor Traps is featured on CNBC.com’s American Greed.

Continue reading "Beware of These Investment Scams" »

The proposed financial reform bill would not make significant changes in the way Wall Street banks are regulated or consumers are protected, despite its lengthy 1,336 pages, according to a recent MSNBC article, “Financial reform diluted with bankers in the mix.” The reason why, as the article’s title suggests, is that the would-be target of reform are playing an influential role in shaping the legislation.

Continue reading "Wall Street Banks and Similar Special Interest Groups Frustrate Meaningful Financial Reform" »

Life settlements - buying rights to senior citizens' life insurance policies - is a risky gamble that should be avoided by most investors, according to Leslie Scism and Larry Light in their Feb. 6 Wall Street Journal article, "Grim Risks of Reaping Death’s Rewards.“

Continue reading "Life Settlement Investments Carry Big Risks" »

In the current interest rate environment, investments traditionally viewed as “conservative” such as money-market accounts or certificates of deposit are yielding investors almost nothing. As such, many retirees or “conservative” investors are in a bind and looking at alternatives to provide them with a yield that gives them sufficient annual income.

One of the alternatives being touted is an “immediate annuity.” An immediate annuity is an annuity that is purchased with a single premium and that begins income payments immediately or very soon after purchase. Unlike buying a bond, which can be sold at anytime or rolled into another bond when it matures, an annuity locks an investor into an interest rate forever. Investors are essentially making a bet on how long they will live. For investors who live into their 80s or longer, these investments could have an attractive payoff. However, for those who do not survive that long, immediate annuities become a poor investment.

Continue reading "A Primer on Immediate Annuities" »

Life settlement companies are soliciting independent broker-dealers to sell private placements of securities (Reg D offerings) based on life insurance policies, according to a recent InvestNews article by Darla Mercado.

Continue reading "Beware Private Placements (Reg D Offerings) Investing in Life Settlement Policies" »

Public school teachers have filed a class action lawsuit against The Variable Annuity Life Insurance Co., known as VALIC, according to a recent article in InvestmentNews by Darla Mercado. The teachers are suing on behalf of all individuals who bought a VALIC deferred annuity after Jan. 1, 1974, in order to fund a qualified retirement plan.

Continue reading "Teachers Sue to Recover Variable Annuity Losses" »

Financial advisors’ unenthusiastic reception of recently-offered lower-cost variable annuities confirms what most observers took for granted – that variable annuity sales are driven primarily by commissions. See “Slimmer variable annuities attract thin following,” InvestmentNews, Jan. 10, 2010, by Darla Mercado.

Continue reading "Why Do They Sell Variable Annuities? - It's the Commissions Silly" »

The increasing number of senior citizens has resulted in an increase in the number of corrupt financial advisors looking to make a commission by persuading trusting seniors to buy unsuitable financial products, such as variable annuities, and engage in other inappropriate financial strategies, according to a July 2009 article in Trial magazine by Ingrid M. Evans and David L. Cheng, called “Protecting seniors from financial abuse.”

Continue reading "Financial Abuse of Senior Citizens is a Growing Problem but Remedies are Available" »

A four-year class action lawsuit brought on behalf of hundreds of thousands of American consumers against insurance giant Allianz Life Insurance Company of North America has come to a confusing and contradictory end, reported the Minnesota StarTribune in its October 14, 2009 article entitled, “A split decision in Allianz Life annuity lawsuit.” Or has it?

A Minnesota jury found earlier this week, on Monday, October 12th, that Allianz Life Insurance Company used a misrepresentation or deceptive practice in the course of selling its two-tiered annuities by falsely promising in its pre-sale marketing materials that consumers would receive a 10% “upfront” bonus when they purchased those annuities. In reality, the class action complaint alleged, the bonus was not “upfront” and was not available to policyholders for 15 years, if ever.

Continue reading "Jury Finds That Allianz Life Insurance Company Used Misrepresentation Or Deceptive Practice In Selling Its Two-Tiered Annuities" »

Last year, the Securities and Exchange Commission issued a rule that brought Equity Index Annuities within its regulatory jurisdiction and provided greater investor protection. Previously, those insurance products were not considered to be securities subject to SEC regulation. The SEC rule was challenged in court by a group of insurance companies. A federal court of appeals ruled that the SEC does have the authority to regulate Equity Index Annuities, but it ordered the SEC to reconsider the rule’s effect on the economy, reported Sara Hansard in her July 26 article in InvestmentNews entitled “SEC’s EIA rule may resurface.” While it is not under a deadline to do so, some observers expect that the SEC will complete is assessment and reissue the rule pretty quickly, rather than asking the court of appeals to reconsider its ruling.

Continue reading "Insurance Companies Try to Thwart SEC Oversight of Equity Indexed Annuities" »

Investors who purchased variable rate annuities with guaranteed minimum returns may be surprised to learn that the guarantee is not necessarily guaranteed. Under some contracts, it is possible for the insurer who wrote the annuity to cancel the guarantee or significantly reduce its payout.

Continue reading "Variable Rate Annuities with Guarantees? - Check the Fine Print" »

With the decline in the major stock market indexes, many life insurance agents are now urging their customers to buy Equity Indexed Universal Life Policies, or EIUL's. These policies have a life insurance component that pays a benefit when you die plus an investment component which usually earns a portion of the gains of a particular index or, if the index declines, a minimal guaranteed return of approximately two percent.

Continue reading "Equity Indexed Universal Life - Typically a Bad Idea" »