Is it fair for a man calling himself an “elder financial specialist” to sell a ninety-year-old woman an annuity which shows no return for the fist 20 years? Should it be legally allowed? New Jersey Assemblywoman Linda Greenstein (D-14) thinks not. Joining with Senators John Adler (D-6) and Robert Singer (R-30) she sponsored the Predatory Annuities Prevention Act which this June passed the New Jersey Legislature unanimously. On Friday, September 19, Governor Corzine is expected to sign it into law.
Labeled the fastest-growing form of elder abuse, fraudulent sellers of unproductive and ill-suiting financial instruments have swept the Garden State, and the nation. Greenstein heard of the mounting problem not only from individuals, but the AARP and other elder groups. “This bill certainly is not limited to protecting only the elderly,” says Greenstein, “but this is where we have witnessed a lot of vulnerability. An older person who gets taken by a questionable salesperson is not likely to share the information. They are embarrassed, and so the news about a conman’s reputation remains hidden.”
Three of Greenstein’s original points made it into the new act which is awaiting the Governor’s signature. 1. Tested Title. The titles “Elder Financial Specialist or “Senior Investment Specialist” now takes on an official meaning. Until now, virtually anyone proffering financial advice would hang out a shingle and call himself a elder specialist. No longer. The New Jersey Department of Banking and Insurance is establishing obligatory tests and experiential credentials which candidates must have to earn this title.
2. Suitability Checklist. Each new annuity sale must be accompanied by a checklist which proves its suitability for the buyer. Investment counselors must show, in effect, that this purchase is a good financial move for the client.
3. 10-Day Revocability. All buyers of all annuities now have 10 days to think over what they are doing with their life savings. It provides time to telephone and even mail brokers and friends and solicit advice, after the sales pressure is off.
To these three items the investment industry nodded its genial assent. For years, the major brokerage firms and investment associations have been making warm mutterings about how investment counselors needed some sorts of controls. But with Greenstein’s fourth point the willingness abruptly halted. The original bill included the right of the victimized buyer to sue both the individual, and by extension, his company in cases of fraudulent sale. Here, at this private right to action, the brokerages dug in their heels and sent the lobbyists on the war path.
“I got all kinds of calls from attorneys and even fellow Assembly people telling me that existing laws already covered such situations and additional law would be onerous,” says Greenstein. From its February introduction, the points were wrangled, and finally, on its June 23 legislative passing, the right-to-sue clause was dropped.
One clarification which Greenstein, Alder, and Singer continually make is that it is not the financial instruments that are on trial or being termed fraudulent. The young parent seeking college funds for his newborn may find a twenty-year-payment annuity ideal. “What’s really the problem is the suitability of the investment to the individual,” says Greenstein.
The bill sponsors have expressed some worry that the Act, as it now stands, is only prevention legislation, with no real enforcement value. Even so, New Jersey’s new Predatory Annuities Prevention Act has been seen as one of the nation’s toughest clamp downs on this fastest-growing form of elder abuse. Biz4
Assemblywoman Linda Greenstein (D) has represented New Jersey’s 14th district (Middlesex/Mercer) since 2000. Currently assistant majority leader, she chairs the Judiciary committee and serves on the Health and Senior Services, and the Clean Elections committees. Greenstein has sponsored bills establishing the office of state controller, reforming public employees benefits, establishing the New Jersey Taxes and Fiscal Policy Study Commission, establishing an online marketplace for manufacturers using recycled products, and a bill to increase public library construction and expansion to $95 million. Greenstein began her political Career in l995 serving on the Plainsboro Township Committee. She earned her bachelors from Vassar College, and masters from John Hopkins University, both in psychology. She took her law degree from J.D. Georgetown University Law Center.
