Elder Financial Exploitation and SEC Whistleblowing

Elder financial exploitation refers to the illegal or improper use of a senior’s funds, property, or assets. It’s a form of elder abuse that can be perpetrated by family members, caregivers, acquaintances, or even complete strangers. Tactics vary, from misusing a power of attorney to scamming seniors with deceptive investment schemes.

Among the possible signs of abuse are:

• Erratic or unusual banking transactions, or changes in banking patterns:
  • Frequent large withdrawals, including daily maximum currency withdrawals from an ATM;
  • Sudden non-sufficient fund activity;
  • Uncharacteristic nonpayment for services, which may indicate a loss of funds or access to funds;
  • Debit transactions that are inconsistent for the older adult;
  • Uncharacteristic attempts to wire large sums of money; or
  • Closing of CDs or accounts without regard to penalties.
• Interactions with older adults or caregivers:
  • A caregiver or other individual shows excessive interest in the older adult’s finances or assets, does not allow the older adult to speak for himself, or is reluctant to leave the older adult’s side during conversations;
  • The older adult shows an unusual degree of fear or submissiveness toward a caregiver, or expresses a fear of eviction or nursing home placement if money is not given to a caretaker;
  • The financial institution is unable to speak directly with the older adult, despite repeated attempts to contact him or her;
  • A new caretaker, relative, or friend suddenly begins conducting financial transactions on behalf of the older adult without proper documentation;
  • The older adult moves away from existing relationships and toward new associations with other “friends” or strangers;
  • The older adult’s financial management changes suddenly, such as through a change of power of attorney to a different family member or a new individual; or
  • The older adult lacks knowledge about his or her financial status, or shows a sudden reluctance to discuss financial matters.

Within the financial industry, the elderly are particularly susceptible to securities fraud, a form of misconduct that involves deceiving investors or manipulating financial markets.

Unscrupulous brokers or advisers might steer senior investors towards unsuitable products, or they might execute unauthorized trades to generate commissions. Sometimes, these professionals might even forge documents or siphon off funds. It’s within this realm of securities fraud that the SEC becomes particularly relevant.

The SEC Whistleblower Program, established by the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, encourages individuals to report violations of federal securities laws, such as those committed through elderly financial exploitation. Whistleblowers, who provide high-quality, original information that leads to an enforcement action with sanctions exceeding $1 million, can be awarded between 10% and 30% of the money collected.

Here’s how potential whistleblowers can approach this process:

• Determine Eligibility: Before reporting, whistleblowers should first determine if they have credible, original information regarding a violation of federal securities laws.
• Maintain Confidentiality: Whistleblowers can remain anonymous when reporting to the SEC, provided they are represented by an attorney.
• Report the Violation: The information can be submitted to the SEC using the online Tips, Complaints, and Referrals (TCR) System or by mailing/faxing a Form TCR.
• Await SEC Action: If the SEC uses the whistleblower’s information in an enforcement action, the whistleblower may be eligible for an award.
• Claim an Award: If sanctions exceed $1 million, the whistleblower can claim their award by completing the appropriate application.

Recognizing that potential whistleblowers might face retaliation or threats from those they’re exposing, the Dodd-Frank Act offers significant protections. Employers are prohibited from discharging, demoting, suspending, or otherwise discriminating against whistleblowers for providing information to the SEC. If retaliation occurs, the whistleblower may have the right to remedies, including job reinstatement, back pay, and compensation for litigation costs

A whistleblower attorney who is experienced with SEC whistleblower claims can guide the whistleblower through a complex web of rules and technicalities that apply to elder financial abuse. The SEC has implemented a number of rules that place strict time limits on perfecting the filing of a TCR disclosure. Failure to comply with these TCR requirements can be fatal to an award case, or make it more difficult to obtain an award years after the TCR is submitted.

Additionally, given the SEC’s whistleblower rules it is important for whistleblowers to speak with an experienced attorney in SEC whistleblower claims before making any disclosures, whether it is to internal compliance at a company, or contacts with the government or news media. Every act of disclosure by the whistleblower can trigger technical requirements that could be missed within the time limits set by the SEC. Consequently, it’s vital that whistleblowers seek and obtain experienced SEC whistleblower counsel in order to avoid the traps for the unwary.

One other area where experienced whistleblower counsel is needed is to help the whistleblower navigate the multiple related enforcement actions that can arise from one whistleblower complaint or disclosure.

For example, it is not unusual for there to be overlapping jurisdiction between civil and criminal enforcement and a fraudulent scheme might encompass not only securities fraud but related frauds, such as tax fraud, commodities fraud and money laundering. It’s important for whistleblowers to obtain experienced counsel who can identify all of the potential claims related to the fraud that is being disclosed by the whistleblower.

Failure to timely report and properly file whistleblower disclosures with the appropriate agencies in the right way can result in the loss of an award, or loss of a whistleblower award in a related action.

If you or someone you know has information regarding securities violations affecting seniors, consider reporting under the SEC Whistleblower Program. KKC has a staff of world-class whistleblower attorneys and rule makers who have handled the most complex SEC whistleblower cases. We will evaluate a whistleblower’s claim and advise on what claims make the most sense in a particular case, in order to maximize protection of the whistleblower and increase the chances of obtaining a just whistleblower award.