California Financial Elder Abuse Statute – A Powerful Weapon for California’s Seniors
America’s population is aging. As people age, their mental faculties can diminish. They can become isolated, dependent, and frightened. Seniors who accumulated wealth over their lifetimes become attractive targets for unscrupulous people who prey on their vulnerabilities.
It generally begins rather simply. A senior citizen with limited investment knowledge and/or limited English skills opens a brokerage account and deposits some fixed income securities. The senior is looking for honest investment advice and hoping to live off the securities’ income for the rest of his or her life. However, within a few months of opening the account, the brokerage firm changes the account profile to aggressive and approves it for margin and options trading.
What follows is high-velocity, day-trading in highly risky stocks and other unsuitable investments. They include penny stocks, option contracts, and leveraged exchange-traded funds whose values are linked to commodity interests and precious metals. The account, with about $500,000 in equity, has a dollar trading volume that exceeds $20 million. Given the senior’s limited investment knowledge and English skills, it is apparent that he or she could not have been directing these trades. All too often, the stockbroker has taken control of the account and is excessively trading to generate commissions in violation of their fiduciary duties. In the end, the customer loses virtually everything he or she had spent a lifetime saving.
Many seniors are reluctant to come forward either out of embarrassment, a lack of understanding of their rights, or both. But you need not be. For senior citizens of California, there is a very powerful tool at your disposal. It is known as the California Financial Elder Abuse Statute. Under this statute, “financial abuse” of an elder occurs when a person or entity takes, secretes, appropriates, obtains, or retains real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both, and knew or should have known the conduct was likely to be harmful. Financial mismanagement of a client’s brokerage account in the manner described above is precisely the type of misconduct for which the California Financial Elder Abuse Statute was designed to punish. And the punishment is quite severe.
To begin with, where the stockbroker is liable for financial elder abuse, the court shall award to the senior citizen their compensatory damages, reasonable attorney’s fees and costs, and all other remedies otherwise provided by law.
What are the “other remedies otherwise provided by law?” If the stockbroker has been guilty of oppression, fraud, or malice, in addition to the actual damages, the senior citizen may recover punitive damages under Cal. Civ. Code §3294 for the sake of example and by way of punishing the defendant. In addition to punitive damages, Cal. Civ. Code §3345 allows for treble damages in consumer fraud cases against where
- The defendant knew the conduct was directed toward a senior citizen,
- The defendant has caused the senior citizen a loss of income or substantial loss of property set aside for retirement or for personal or family care and maintenance, or assets essential to the health or welfare of the senior citizen and
- The senior citizen was substantially more vulnerable than other members of the public to the defendant’s conduct because of age, impaired understanding, and actually suffered substantial emotional, or economic damage resulting from the defendant’s conduct.
To summarize, under the California Financial Elder Abuse Statute, a victim can recover their losses and their attorneys’ fees. Punitive damages and treble damages are also available for egregious misconduct. As you can see, the California Financial Elder Abuse Statute can transform a relatively small case into one that presents the stockbroker and his or firm with a potential for high risk of loss. This creates tremendous leverage for the senior citizen and a disincentive for all but the hardest of wrongdoers to resist.
If you are a victim of investor fraud, don’t be reluctant to assert your rights. If you feel you or a loved one has been the victim of financial elder abuse, please call one of our investment fraud lawyers in our San Diego or San Francisco offices.