Transcript Investor Protection

Ohio Division of Securities
Fraud Prevention and Investor Protection
Your name here
INVESTMENT SCAMS

Over $10 Billion a year

$1 million every hour

All educational and income
levels
Division of Securities

Licensing Section

Registration Section

Enforcement Section
Don’t become a Victim.
Who Needs to be Licensed?

Salespersons

Brokerage Firms

Investment Advisers

Investment Adviser Representatives
Central Registration Depository
(CRD)
Salesperson’s Employment History
 Customer Complaints
 Pending Arbitration
 Criminal History
 Actions by other Regulatory Agencies

Securities Salespeople are
Prohibited from:

Making False Representations of
Material Fact (i.e.Lying)

Omitting to Disclose Material
Information (i.e. not telling you
important things)

Selling Unregistered Securities
Securities Salespeople are
Prohibited from:
Recommending Unsuitable Securities
 Executing Unauthorized Transactions
 Excessive Trading in Your Account
(Churning)
 Charging a Price not reasonably related
to the Market Price
 Receiving Excessive Commissions
 Guaranteeing against Losses

Securities Investor Protection
Corporation (SIPC)

Coverage provides losses suffered by
investors in the event of financial
difficulties of a brokerage firm.

Provides coverage up to $500,000.
Registration of Securities

All Securities sold in
the State of Ohio
must be Registered
or properly exempt
from Registration.
Enforcement Section
Investigates alleged
violations of the Ohio
Securities Act and
takes action when
necessary.
INVESTMENTS
Characteristics of a Scam


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

Guaranteed Returns
Promise of Quick
Profits
Inside Information
Refusal to Send
Written Information
Calls coming from
Distant Cities/States

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
Reluctant to Provide
Information about
Salesperson or Firm
Unusual
Arrangements for
Payment
Poorly Presented
Financial Products
Types of Investment Fraud

PONZI Schemes

Franchise/Business
Opportunities

Promissory Notes

International
Investing

Viatical Settlements

Affinity Fraud
Boiler Room
QuickTime™ and a
Sorenson Video decompressor
are needed to see this picture.
Boiler Rooms

Call people in other states

Mooch lists

Answer for every objection

Little or no risk

High rate of return & secret
tips
Boiler Rooms
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Demand immediate action

Won’t disclose street
address

Avoid U.S. mails

Stall with excuses

Disappear when heat’s on
Pyramid Schemes
Network
Marketing
Pyramid
Scheme

Profit or cut for
recruiting

No product or
way too high
priced product

Unrealistic
claims

Commission on
sale of product

Not paid for
recruits

Tangible product
or service

Fair market price
Ponzi Schemes

Type of pyramid
scheme

Use later investors’ $ to
pay off early investors “songbirds”

Promise very large
returns in short time
Ponzi Schemes

“Can’t lose” way of making
money

Collapses when #
investors waiting for $> #
of new investors

“House of cards” collapses
AFFINITY FRAUD
What is it?
It is an investment scheme that preys
upon members of identifiable groups.
Scam artists target the tight-knit structure
of groups to make it less likely that a scam
will be detected and because victims are
more likely to forgive one of their own.
AFFINITY FRAUD
Swindlers who promote affinity fraud
schemes will enlist respected leaders within a
community or group to spread the word about
an investment deal.
How can you protect yourself?
AFFINITY FRAUD
Protect yourself the same way as with
any other investment prospect: CHECK
OUT EVERYTHING -- no matter how
trustworthy the person who brings the
investment opportunity to your attention
may seem to be.
Fraudulent Sales Techniques
High-pressure sales tactics.
Hang up. Fraudulent telephone sales
people do not respect your privacy or your
right to say no.
Fraudulent Sales Techniques
“Decide now before the opportunity is
gone.”
Hang up. Refuse to be pressured. Do not
make impulse decisions.
Fraudulent Sales Techniques
Promises that sound too good to be
true.
Hang up. Keep in mind that a con artist
will tell you whatever he or she thinks it will
take to close the sale. Ask to have all
claims on paper. Get the advice of
experts.
Fraudulent Sales Techniques
“The investment is risk-free.”
Hang up. All investments have risk.
Any claim to the contrary by an investment
promoter is a “red flag” warning of a scam.
Fraudulent Sales Techniques
“There is no time to provide written
information and references.”
Tell the caller that you must have printed
information in order to ask your attorney or
financial advisor for an opinion. Keep in
mind that slick brochures and glowing
testimonials can be filled with falsehoods
and distortion.
Fraudulent Sales Techniques
“You have won a free gift or trip.”
The free gift or trip is a sales gimmick often
used in real estate investment scams.
Remember that “there is no free lunch,”
particularly when it comes to investing.
Fraudulent Sales Techniques
“We will pick up the money at your
home”
Hang up. The swindler is trying to force
you to act without having time to
consider your decision.
Fraudulent Sales Techniques
“We need your credit card or checking
account number.”
Hang up. The swindlers want your credit
card number so that can make fraudulent
purchases with your credit card
information. Refuse to give financial
information, or credit card or checking
account numbers, over the telephone
unless you initiated the call.
Investor Bill of Rights

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Right to Information on
firm/salesperson
Right to Information on
Risks/Obligations
Right to good advice
Right to all paperwork
Right to accurate
account statements
Investor Bill of Rights

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Right to have terms
explained
Right to your money
Right to prompt service
Right to know what you
are being charged and
why
Right to State records
concerning your
broker/salesperson
Warning Signs

High Pressure Sales Tactics - Must Act Now !

Promises of High Guaranteed Returns

Refusal to Send you Written Information
Before You Invest
If it sounds to good to be true..

It Probably Is !!

Say No to offers you
are unsure about
The fact of the matter is...
IDENTITY THEFT
Occurs when a criminal obtains and
uses another person’s personal
information to purchase goods or
services fraudulently.
How To Protect Yourself From
Identity Theft

Do not throw out credit card statements or
other financial papers where a criminal could
retrieve them from the trash

Carry only one or two credit cards in your
wallet
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Cancel all unused credit card accounts
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Keep a photocopy of all your credit cards,
account numbers, expiration dates, and
customer service telephone numbers
How To Protect Yourself From
Identity Theft

Never toss ATM receipts in a public trash
container; always take them with you
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Watch the mail when you are expecting a
new credit card and immediately contact the
issuer if the credit card does not arrive

Remove your name from the marketing lists
of credit bureaus by calling the Credit
Reporting Industry opt-out phone number at
(888)567-8688
How To Protect Yourself From
Identity Theft

Be cautious of anyone calling to “confirm”
personal or financial information. Often, these
are criminals trying to obtain your information
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Review all your credit card and financial
statements for any unusual activity,
purchases, or charges

Do not carry your Social Security card in your
wallet
How To Protect Yourself From
Identity Theft

Do not agree to any sale or offer over the telephone
when the call is unsolicited and you do not know who
the caller or company is. Request that promotional
material be mailed to you instead

Be careful when using the Internet and make sure the
website is a secured website before you enter any
personal information on the site

Report lost or stolen credit cards to the three national
credit-reporting agencies in writing
Get a Copy of Your Report
 Experian
(TRW)
888-397-3742
 Equifax
800-685-1111
 TransUnion
800-916-8800
What Can You Do To Protect
Yourself?
 Take a breather.
 Remember that the person on the other end of the
phone is a salesperson.
 Know the deal. Read the material.
 Check out the salesperson and firm.
What Can You Do To Protect
Yourself?
 Stick with investments you understand.
 Do not sign papers you have not read or do not
understand.
 Be skeptical!
Ohio Division of Securities
Hotline:
1-800-788-1194