[Editor’s Note: This is a FINRA publication. Typically, FINRA sugar coats what is really going on all over and harming people, painting the behavior as unusual when it is really commonplace. FINRA publishes articles like this to try to place the responsibility on the public, rather than its lack of regulating the brokerage firms and stock brokers. Remember, the brokerage firms and stock brokers fund and run FINRA, not the government. The article is included here to show that FINRA is aware of all of this bad conduct by brokerage firms and stock brokers. If you have been affected by this type of conduct, it is important that you NOT blame yourself. This is a lack of regulation and enforcement. We can help.]
Your company offers retirement benefits to help your employees lay the groundwork for financial independence when they leave the workplace. There is one more thing you can do for those employees nearing retirement—help ensure they do not fall prey to early retirement scams that may wipe out years of savings and company benefits.
Your company may host seminars or other meetings to educate your employees about retirement planning, or your company may permit third party providers to conduct seminars for your employees. While most third-party provided retirement planning seminars offer valuable information, others may not be appropriate, particularly those that promote voluntary early retirement. For example, some seminars include misleading assumptions about investment returns, suggest risky withdrawal strategies, or lead to outright fraud. This brochure will help you spot early retirement seminar schemes that can derail years of employee savings and sound corporate policy.
Because not all early retirement seminars are in your employees’ best interest, you can take these steps to help ensure your employees receive sound financial information in a seminar:
CHECK that the person who wants to talk to your employees is properly qualified to talk about early retirement issues.
CONFIRM that the speaker has obtained all necessary approvals from his or her company to offer the early retirement seminar and that seminar and other sales materials have been approved as required.
REVIEW seminar materials such as handouts, slides and speaker’s notes to identify red flags that suggest the content may be problematic.
REFER seminar materials to FINRA if you are not comfortable with what you see.
Here is how you can put this checklist into practice.
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When communicating with investors, including your employees, securities firms need to follow rules that are designed to protect the public from scams, irresponsible promises of future investment returns, and other improper communications. FINRA rules require that communications from securities firms and their personnel:
Include no false, exaggerated, unwarranted or misleading statements or claims;
Be fair and balanced and provide a sound basis to evaluate the facts regarding the product or service being offered;
Not omit material facts that would cause the communication to mislead or contain legends or footnotes that would inhibit understanding of the communication;
Make no predictions or projections of future performance, imply that past performance will recur, or make any exaggerated or unwarranted claim, opinion, or forecast about any investment; and
Prominently disclose the name of the firm in the sales material.
FINRA reviews thousands of communications every year for compliance with the standards listed above. We tell the firm whether materials can be used as filed, need to be revised, or cannot be used.
TIP: If seminar material has been filed with FINRA, the firm or individual making the presentation should be able to tell you whether it was approved for use or not and show you FINRA’s review letter if you request it. Of course, not all sales material must be filed with FINRA and even communications that are not filed with FINRA may comply with the rules.
How You Can Protect Your Employees
You want your employees to make sound retirement decisions. If your company allows representatives of a firm to solicit your employees to attend retirement seminars, you can ask a few questions and take some simple steps to determine whether the seminar complies with applicable requirements.
Broker Credentials: Individuals associated with FINRA-registered firms that deal with the public generally must have the appropriate license for the products that they sell. Ask the person(s) who will conduct the seminar what FINRA licenses or registrations they hold.
Investment Adviser Registration: People or firms that give investment advice must register with the SEC if they manage $25 million or more in client assets or their state securities agency if they manage less than $25 million.
Insurance Agent License: All insurance agents must be properly registered with their state insurance commission. Insurance agents selling variable annuities or variable insurance policies must also be registered with FINRA.
Speaker’s Background: Confirm the information you receive by using FINRA BrokerCheck at http://www.FINRA.org, or checking with the SEC or appropriate state securities or insurance regulator. See below for links and other contact information.
Firm Approval Procedures: FINRA-registered firms must approve the materials that will be used for a seminar. You can call the home or supervisory office of the firm to verify whether the materials were approved.
Regulatory Approvals: Ask whether the materials were filed with FINRA. If so, consider requesting a copy of FINRA’s review letter. The firm should be able to provide it to you. If some other regulator is involved, ask the speaker about that regulator's approval process. Consider calling the regulator to confirm what you are told.
Seminar Content: Ask to see seminar materials in advance. Information, both in the main text and footnotes, should be clear and complete. Materials should provide a sound basis for evaluating the products or services offered.
Performance Projections: Seminar materials should not project the performance of investments. They should not suggest that past performance is an indication of future performance. Explanations of mathematical principles such as compounding or how tax-deferral works are acceptable. Any examples should indicate that they are hypothetical and not indicative of any specific investment may perform.
Disclosure of Risks: All investments carry some risk. Presentations of products or investment strategies should include a balanced discussion of benefits and risks. Be wary of statements suggesting that an investment or strategy will lead to stability, safety, or peace of mind without explaining the risks. Without the downside, you do not have a balanced presentation.
Promissory Images: Look for pictures or graphics that suggest investments will always be successful – dollar signs, money trees, cornucopias, pots of gold, bank vaults. FINRA rules prohibit this kind of imagery.
Firm Identification: The firm sponsoring the seminar needs to identify itself clearly and prominently in the materials distributed to participants.
