Ohio Division of Securities Your name here Fraud Prevention and Investor Protection

INVESTMENT SCAMS n Over $10 Billion a year n $1 million every hour n All educational and income levels

Division of Securities n Licensing Section n Registration Section n Enforcement Section

Don’t become a Victim.

Who Needs to be Licensed? n Sn Sn Sn Salespersons n Bn Bn Bn Brokerage Firms n In In In Investment Advisers n In In In Investment Adviser Representatives

Central Registration Depository (CRD) n Salesperson’s Employment History n Customer Complaints n Pending Arbitration n Criminal History n Actions by other Regulatory Agencies

Securities Salespeople are Prohibited from: n Making False Representations of Material Fact (i.e.Lying) n Omitting to Disclose Material Information (i.e. not telling you important things) n Selling Unregistered Securities

Securities Salespeople are Prohibited from: n Recommending Unsuitable Securities n Executing Unauthorized Transactions n Excessive Trading in Your Account (Churning) n Charging a Price not reasonably related to the Market Price n Receiving Excessive Commissions n Guaranteeing against Losses

Securities Investor Protection Corporation (SIPC) n Coverage provides losses suffered by investors in the event of financial difficulties of a brokerage firm. n Provides coverage up to $500,000.

Registration of Securities n 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 n Guaranteed Returns n Promise of Quick Profits n Inside Information n Refusal to Send Written Information n Calls coming from Distant Cities/States n Reluctant to Provide Information about Salesperson or Firm n Unusual Arrangements for Payment n Poorly Presented Financial Products

Types of Investment Fraud n PONZI Schemes n Promissory Notes n Viatical Settlements n Franchise/Business Opportunities n International Investing n Affinity Fraud

Boiler Room

Boiler Rooms n Call people in other states n Mooch lists n Answer for every objection n Little or no risk n High rate of return & secret tips

Boiler Rooms n Demand immediate action n Won’t disclose street address n Avoid U.S. mails n Stall with excuses n Disappear when heat’s on

Pyramid Schemes Pyramid Scheme Pyramid Scheme n Profit or cut for recruiting n No product or way too high priced product n Unrealistic claims Network Marketing n Commission on sale of product n Not paid for recruits n Tangible product or service n Fair market price

Ponzi Schemes n Type of pyramid scheme n Use later investors’ $ to pay off early investors - “songbirds” n Promise very large returns in short time

Ponzi Schemes n “Can’t lose” way of making money n Collapses when # investors waiting for $> # of new investors n “House of cards” collapses

AFFINITY FRAUD uWhat is it? uIt is an investment scheme that preys upon members of identifiable groups. uScam 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 uSwindlers who promote affinity fraud schemes will enlist respected leaders within a community or group to spread the word about an investment deal. uHow can you protect yourself?

AFFINITY FRAUD uProtect 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 uHigh-pressure sales tactics. uHang up. Fraudulent telephone sales people do not respect your privacy or your right to say no.

Fraudulent Sales Techniques n“Decide now before the opportunity is gone.” FHang up. Refuse to be pressured. Do not make impulse decisions.

Fraudulent Sales Techniques nPromises that sound too good to be true. FHang 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 n“The investment is risk-free.” FHang 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 n“There is no time to provide written information and references.” FTell 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 n“You have won a free gift or trip.” FThe 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 n“We will pick up the money at your home” FHang up. The swindler is trying to force you to act without having time to consider your decision.

Fraudulent Sales Techniques n“We need your credit card or checking account number.” FHang 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 n Right to Information on firm/salesperson n Right to Information on Risks/Obligations n Right to good advice n Right to all paperwork n Right to accurate account statements

Investor Bill of Rights n Right to have terms explained n Right to your money n Right to prompt service n Right to know what you are being charged and why n Right to State records concerning your broker/salesperson

Warning Signs n High Pressure Sales Tactics - Must Act Now ! n Promises of High Guaranteed Returns n Refusal to Send you Written Information Before You Invest

If it sounds to good to be true.. n It Probably Is !! n 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 n Do not throw out credit card statements or other financial papers where a criminal could retrieve them from the trash n Carry only one or two credit cards in your wallet n Cancel all unused credit card accounts n Keep a photocopy of all your credit cards, account numbers, expiration dates, and customer service telephone numbers

How To Protect Yourself From Identity Theft n Never toss ATM receipts in a public trash container; always take them with you n Watch the mail when you are expecting a new credit card and immediately contact the issuer if the credit card does not arrive n Remove your name from the marketing lists of credit bureaus by calling the Credit Reporting Industry opt-out phone number at (888)

How To Protect Yourself From Identity Theft n Be cautious of anyone calling to “confirm” personal or financial information. Often, these are criminals trying to obtain your information n Review all your credit card and financial statements for any unusual activity, purchases, or charges n Do not carry your Social Security card in your wallet

How To Protect Yourself From Identity Theft n 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 n Be careful when using the Internet and make sure the website is a secured website before you enter any personal information on the site n Report lost or stolen credit cards to the three national credit-reporting agencies in writing

Get a Copy of Your Report n Experian (TRW) n Equifax n TransUnion

What Can You Do To Protect Yourself? nTake a breather. nRemember that the person on the other end of the phone is a salesperson. nKnow the deal. Read the material. nCheck out the salesperson and firm.

What Can You Do To Protect Yourself? nStick with investments you understand. nDo not sign papers you have not read or do not understand. nBe skeptical!

Ohio Division of Securities Hotline: