SEPT. 1, 2000

Money Matters
Looking for a CD?  Look Out!

Some CD brokers are preying on elderly investors by promising high-rate certificates of deposit that seem to be redeemable after one year. In fact, many of these CDs may not mature for 20 or 30 years.

The Securities and Exchange Commission (SEC) has received numerous complaints of such deceptive practices by some brokerage firms (not banks). In response, the SEC has prepared a free brochure to warn consumers of these misleading CD sales. To get the brochure, visit the SEC Web site at www.sec.gov, click on "investor assistance & complaints," and then on "news you can use."

In the meantime, you may want to remind your clients to be aware of CD contracts that say in big type: "one year noncallable" or "callable after one year." While this seems to indicate the client can redeem the CD after one year, it really only means that the bank, if it chooses, can redeem (or call) the CD after a year. But that will not likely happen.

Some brokers are also claiming there is "no penalty for early withdrawal," when no early withdrawals are even allowed. The broker may be able to sell the CD to another client, but most likely for much less than the purchase price. Basically, by the time the investor discovers the trap, it will be too late.