STATE OF NEW JERSEY Office of the Attorney General Bureau of Securities Protecting Your Finances How To Avoid Investment Fraud And Scams

Beware of Great Investment “Opportunities” Examples: Investment is off-shore, tax-sheltered venture Use of terms “Guaranteed” or “Risk-Free” Calls that are unsolicited – told you can get in at ground level, claims of inside information Promise of high returns Told not to tell banker, lawyer, family members, etc., since the investment was usually only sold to large international banks but “YOU could get in on it.” -2-

Why Seniors Are Targets of Fraud Does the following fit you or someone you know? Often home to answer the phone or door Involved in community, social or church groups Alone during the day Health problems–reliance on others Dissatisfied with interest rates and returns Trusting – big for the scam artist who can appear attentive, nice, or a friend of a friend LIFESTYLE -3-

Why Seniors Are Targets of Fraud How They Get To You … They gain your trust and use your lifestyle to do so by: being Convincing befriending you or a friend or relative to get to others Being a “nice guy” Offering to look at your finances and help you with them Providing false credentials or easily produced materials Remember, their job/profession is to know how to steal from you. They are professionals- like you – but they are in a profession that is illegal and conducted without conscience

Cold calling and high pressure sales tactics High unsubstantiated claims about future earnings Claims about proven, no-risk, minimal risk or guaranteed Reliance on references they have hand-picked – phone contacts, too Evasive answers and lack of information Intimidation and made to feel embarrassed Pressure to do it “now” or you’ll lose the chance K now the Warning Signs:

Might use your anti-tax or anti-government sentiments to sell to you Offer might include ability to avoid paying tax and keep your money outside of the country where government won’t be able to get it Usually offers very attractive rate of return Again, told to keep it a secret – “don’t tell” family, your lawyer, etc. S cam artists use can phony references and offer information on slick documents but with fraudulent credentials and logos. It’s not easy to examine offers thoroughly sometimes, HOWEVER, IF you take the time to research the information you were given and call the Bureau of Securities for background information, you could prevent a loss that most likely - will be unrecoverable. -6-

What Should I Watch Out For? Any financial transaction completed on your behalf or without your consent Transactions for which you have no record Someone who promises or guarantees a high return or a future price Anyone asking you to pre-sign a blank document Guarantees of any kind or promises to refund purchase price Failure to provide a prospectus Secretive behavior or requests for silence -7 -

What Will An Advisor, Broker Or Broker-Dealer Ask Me? T o know you as a client, the following will be asked: Age Occupation Investment Objectives Annual Income and Net Worth Tolerance for Risk Your current knowledge and experience with investments Always ask how the investment is suitable for you, based upon the above information. -8-

Quick Results – impress investors It is common for victims to receive payments from their investment within a short period of time. After you have developed confidence in the person selling the investment, you, the investor, may choose to invest more money in order to be able to enjoy the same percentage return, but, on an even larger investment. Scammers, then, will disappear with all of your money. Where does the money come from? A fraud operator will use money from later investors to pay returns to earlier investors. By continuing this way, they can pay handsome returns while keeping the majority of the invested money for themselves. In time, the later investors get nothing. -9-

No Return Calls Or “The Check Is In The Mail” Beware when you can’t reach the person who sold you the investment Beware when you are repeatedly told that your investment dollars are being mailed to you but… the check never arrives Beware when instead of accepting your request to get back your investment, you are told not to sell because you are missing out on a good deal and better things are going to happen, so, they attempt to talk you into investing more -10-

The Attractiveness of Membership There is a certain satisfaction in investing in a secret product that has made wealthy people even richer. It seems to have credibility simply because it’s a secret. You’re told not to tell anyone because it would collapse if it were made public and no one wants it to collapse – especially you, if you did invest. Many investment scams are intentionally made to seem complex and not easily understood, making the scam artist appear to be an expert, leaving you to rely on their advise and expertise. -11-

Twelve Tips To Help Protect You and Your Money 1) Ask questions and make sure your questions are answered. 2)Takes notes of every contact with the person selling you the investment, including full name, date and time. 3)If you feel intimidated or pressured, consider a new agent. 4)Don’t assume the person is an “expert.” 5)Don’t be drawn in by a well-dressed, confident person - scam artists are aware of the importance of first impression. 6) Be aware that your Bank, in addition to selling more than the traditional Bank products, is able to sell annuities and securities through affiliated companies. -12-

Twelve Tips To Help Protect You and Your Money continued 7) Always get written documentation – keep copies of all documents and never accept a verbal contract - even if it’s family. Remember, it business! 8) Never sign anything before you read it carefully. 9) Be sure you understand what is written, if not, contact a lawyer. 10) Don’t be pressured into making a rushed decision. 11)Before you invest, call the Bureau of Securities for credential check and background information on the person selling the investment. 12)Make sure the person you are dealing with clearly states which role they are representing, i.e., insurance agent, investment advisor or securities agent. In other words, “Who am I dealing with?” -13-

What Do You Do If You Suspect Fraud Or Have An Inquiry? Contact your representative to see if your questions can be answered to your satisfaction. If you do not receive an answer to your satisfaction, contact the broker, manager or compliance officer. Contact the New Jersey Bureau of Securities for fraud suspicion or if you have questions. Free background information is available

Have The Following Information Available, If Possible, To Make A Complaint: The name of the account holder The account number Name of individual selling the investment Chronological list of events – if available Copies of documents (statements, letters ) Description of what you want done or what you suspect took place It’s good practice to keep a written record and separate file with this information -15-

New Jersey Bureau of Securities Contact Information Toll free: I–Invest or ( ) Website: Or reach us directly by at:

T ypes Of Scams: Ponzi Schemes This scheme was named after Charles Ponzi who in the early 1900s swindled investors out of $10 million by promising 40% returns. His scheme is used today and a favorite among con artists. How it works: Promise high returns - and pay early investors with money raised from later investors. Only early investors make money – their success is the draw for later investors. The true winners – the con artists who set the Ponzi scheme in motion

T ypes of Scams: continued Affinity Fraud Con-artists establish credibility by association through those friendships made in groups such as social, religious or sports. Scam artists are able to establish and use this false credibility to meet others and then can offer special deals or secretive investments because you are somehow – special.

Types of Scams : continued Promissory Notes These are short-term debt investments Promissory notes are issued by little known or sometimes, non-existent companies, promising high returns, for example 15% monthly – “with little or no risk!” The notes can be vehicles for fraud when the issuer – doesn’t have the capability of delivering the return or simply doesn’t exist.

Information that you can obtain from the Bureau: Central Registration Depository report (CRD or IARD) A national database that provides the regulatory history and licensing credentials of broker-dealers, investment advisers and over 500,000 registered representatives. YOU can get information that includes complaint and disciplinary history. YOU can also obtain their employment history. This means that you can check on any registered representative or investment adviser that you are planning to work with.

Thank you for attending and for checking with the NJ Bureau of Securities in the future before you invest with someone new or in a new investment. If you have a complaint or suspect something may not be right, call the Bureau i-invest One of our investigators will pick up or if not immediately available, you will get a call back!!!

Speaker’s Bureau Debora Whipple Investor Education Director Office of the Attorney General New Jersey Bureau of Securities ###