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Protecting Seniors from Wall Street

Last update on: Mar 15 2020
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Since the Federal Reserve adopted its zero interest rate policy, post-career Americans have been searching for different ways to earn higher income on their investments. Wall Street responded with a range of new investment products. The questions are: Do the people buying these investments fully understand them, and are the investments appropriate for the buyers?

Massachusetts is investigating 15 brokerage firms to determine if their sales of alternative investment products to seniors are appropriate. It appears to be a wide-ranging review of sales practices at the major firms. Investments to be examined include real estate investment trusts, oil and gas partnerships, private partnerships, and structured products. All of these tend to be illiquid, non-publicly-traded vehicles with fairly high fees.

Secretary of the Commonwealth William F. Galvin began the investigation on Wednesday, based on the findings of a probe into sales of REITs to seniors. That REIT investigation led to a settlement earlier this year with five broker-dealers over improper sales to seniors. The settlement included $975,000 in fines and $8.6 million in restitution.

Alternative products can be attractive because they typically offer higher returns than traditional products, Mr. Galvin said. “While these products are not unsuitable in and of themselves, they are accidents waiting to happen,” he said in a statement on Wednesday.

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