SEC Puts Out Warning To TSP Investors: Federal Employee Benefits Counselors Scam
The Securities and Exchange Commission (SEC) has warned investors and participants in the Thrift Savings Plan about a scam directed at federal employees by former members of the Federal Employee Benefits Counselors organization.
The SEC has already filed fraud charges on four former Federal Employee Benefits Counselors for creating an impression of being affiliated with or had federal government or TSP approval.
According to the SEC, the brokers allegedly swayed federal employees to roll their TSP account funds into higher-fee variable annuities. With the 200 variable annuities worth about $40 million, they earned around $1.7 million in commission.
SEC Atlanta Regional Office Associate Director Aaron Lipson said the brokers were driven by the potential of higher commissions while they targeted federal employees older than 59 years of age. Moreover, they deliberately hid relevant information when they suggested they purchase the various annuities.
The SEC said the brokers allegedly convinced these federal employees that they were permitted to solicit and provide advice about their TSP and retirement savings accounts. However, doctored and incomplete transaction forms with no information about the investment were sent to TSP investors. They also had no connection to the TSP.
This is just the latest scam targeting current employees and retirees of the federal government. Retirees were subjected to two additional plots in just 2017 only.
In June, the Office of Personnel Management warned the workforce of companies’ aggressive marketing push. The offer of cash payments for some or all of the annuity payments. The agency also warned them in March of a government imposter scam that threatened to end a person’s retirement if the retiree didn’t send an immediate payment.
SEC’s Office of Investor Education and Advocacy Chief Counsel Owen Donley said scammers tend to go after people who can supply them with large sums of cash, and TSP investors are often a target. Which is what these former Federal Employee Benefits Counselors affiliates appear to have done. He said it’s not surprising that federal employees are targets because the money is there.
Donley said scammers target certain groups of folks – what is known as affinity fraud. He said it could be a religious community, the military or even retirees. Donley said every year the fraud targets various groups.
What Can You Do?
There are things you can do to protect yourself and your investments from being scammed.
- Be wary should you get a phone call or message that appears to come from a group that claims to have federal government approval or an affiliation. Donley said no federal agency – the TSP included – will go a person to push for a service or product. He said it’s a red flag if this communication takes place. The SEC advises federal government employees and retirees to reach out to the TSP first to see if the offer is legitimate.
- Never provide your personal information during this time. Federal organizations will not ask for your password, social security number or account number during unsolicited messages or phone calls.
- SEC advises employees and retirees to learn about the different investment options and what the terms and conditions are for each of them. When a person is aware of the existing opportunities, it helps them to know what it and isn’t legit.
Donley said there are some short-term investment opportunities and some that are not. He said some investment options have charges and surrender fees if used within the first two years. Donley said retirees must be aware of the possible outcomes.
Since making investment decisions is a bit complex, it’s advised that federal employees get advice from their financial planners.
The SEC recommends federal employees to work with only a registered and licensed financial investment professionals. The agency has a database on its website that helps federal employees to find out about an investment professional quickly.
Donley said older Americans have turned to using social media for some interaction. The agency is giving some advice about social media use. Donley said some people are not careful with their privacy settings, which means scammers can learn all kinds of information about where they live, their interests, etc. He said it’s this information that scammers use to lure investors into providing them with a false sense of security with their account information.
The Federal Employee Benefits Counselors organization has issued a statement suggesting that they are blameless in the actions of their affiliated professionals. The Courts have yet to rule on the issue and the SEC has not yet responded to the Federal Employee Benefits Counselors statement.