September 22, 2015 / 6:16 PM / 4 years ago

U.S. states order return of $400 million to investors for 2014

(Reuters) - U.S. state securities regulators ordered wrongdoers to return more than $400 million to investors in 2014, a year marked by ongoing fraud against the elderly, a regulatory group said on Tuesday.

Fraudsters targeted seniors in one-quarter of enforcement actions in 2014 initiated by 37 states that track victims by age, said the North American Securities Administrators Association (NASAA). The group is composed of securities regulators from U.S. states, Canada and Mexico.

Of the 1,047 actions taken in those states, 255 involved financial abuse of seniors, NASAA said. In 2013, about one-fifth, or 311 of the 1463 cases in those states, involved seniors, NASAA said.

The findings, part of an annual enforcement survey that NASAA conducts of regulators, come as some U.S. states are either adopting or considering new measures to curb fraud against seniors.

The proposals generally allow brokerages to temporarily hold off on disbursing funds or securities when they suspect potential financial abuse and believe their clients may be mentally impaired.

Last week the Financial Industry Regulatory Authority’s board approved a plan aimed at helping Wall Street brokerages bolster protection from scams for seniors and other vulnerable adults. In June, Missouri became the third state to enact a law to protect senior citizens from scams and other types of financial exploitation, following similar efforts in Washington and Delaware.

More than five million Americans over the age of 65 have Alzheimer’s disease, the most common form of dementia, according to the Chicago-based Alzheimer’s Association.

These victims can become easy targets. U.S. seniors lose as much as $2.6 billion per year to financial exploitation, according to the Securities Industry and Financial Markets Association.

State securities regulators conducted 4,853 investigations in 2014 and initiated 2,042 enforcement actions, according to the survey, based on data from 49 states.

State securities regulators also imposed a total of $174 million in fines and prison sentences of 1,629 years, in addition to ordering more than $400 million in restitution.

Sales of high risk, unregistered securities, known as “private placements,” were at issue in more than half of states’ actions involving senior victims, NASAA said.

The securities, which can provide a way for small companies to raise capital, don’t have to be registered with regulators and are supposed to be sold only to investors who meet certain income and net worth standards.

But promoters of such deals do not always follow those rules, leaving investors with illiquid securities that they cannot resell. The securities can also become worthless when the businesses investors back fail or turn out to be scams, lawyers say.

Reporting by Suzanne Barlyn; Editing by Alan Crosby

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