Department of Commerce & Consumer Affairs Business Registration Division Commissioner of Securities Office Investor Education Program PREDATORY TACTICS 8/21/2007

Predatory Tactics State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Presentation Agenda Today we will cover:  Predatory Tactics  Questions to Ask  How the State DCCA Securities Branch can help State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Predatory Tactic$ = Inve$tment Fraud Why are seniors tempting targets? “That’s where the money is, and that’s where the fraud is.” Christopher Cox, Chairman Securities Exchange & Commission Provided by NASAA Daily News Highlights, Oct. 23, 2006 State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Predatory Tactic$ = Inve$tment Fraud “The 79 million baby boomers have more than $8.5 trillion in investable assets.” “Nearly half of all investor complaints, and a third of enforcement actions involve investors 50 and older.” Provided by NASAA Daily News Highlights, Oct. 23, 2006 State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Define Predatory Tactics  Deceptive methods intended to financially injure or exploit others for personal gain or profit. State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Examples of Predatory Tactics  High Pressure sales techniques Predator: “This is a special offer and ONLY available to you TODAY. It will not be available tomorrow. You must act NOW.“ State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Examples of Predatory Tactics  Guaranteeing against losses Predator: “Guaranteed or your money back.” State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Examples of Predatory Tactics  Making promises that sounds to good to be true. Predator: “I promise you that this investment has no risk and gets double digits returns in just 3 months.” State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Examples of Predatory Tactics  Deals in cash Predator: “We can come to your house to pick up the check or cash to make the investment. Would you like us to come NOW?” State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Examples of Predatory Tactics  Recommends unsuitable securities that are obviously not right for you. Predator: “This is a great variable annuity with regular income payments and no one else will do this for you because you are 75, I’m giving you an opportunity to purchase it today.” State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Examples of Predatory Tactics  Failing to disclose material information Predator: “Just sign here and I will get you the details later.” State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Examples of Predatory Tactics  Beware of “senior” or “elder” designations or credentials. Credentials can be misleading. -Which ones are financial expert designations recognized under the securities laws? -Which ones are not? -Can you tell the difference? CFPChFCPFSCFA CIC CSASSSERA State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

These are the only recognized financial expert designations under the state securities laws. State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program AbbreviationDesignationOrganization 1CFPCertified Financial Planner International Board of Standards and Practices for Certified Financial Planners, Inc. 2ChFCChartered Financial Consultant American College 3PFSPersonal Financial Specialist American Institute of Certified Public Accountants 4CFAChartered Financial Analyst Institute of Chartered Financial Analyst 5CICChartered Investment Counselor Investment Counsel Association of American, Inc.

State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program AbbreviationDesignationOrganization 1CSACertified Senior Adviser Whatever organization they say they’re with... 2SSSenior Specialist 3SESenior Expert 4RARetirement Adviser These are NOT recognized financial expert designations under the state securities laws.

TAKE CONTROL OF YOUR INVESTMENTS. ASK QUESTIONS BEFORE YOU GIVE THEM INFORMATION OR MONEY. THE PREDATORS IN THEIR TRACKS… State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Ask General Questions  How did you get my name?  Where is your office?  Where are you calling from?  How long have you been in business? State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Ask Registration Questions  Are you registered to sell securities in Hawaii?  Is your company registered to sell securities in Hawaii?  Is this investment registered with the State DCCA Securities Compliance Branch? State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Ask Financial Questions  How much money have you invested personally in this deal?  What is your process to ensure my financial needs and investment objectives are met?  Can you send me a copy of your company’s current financial statements? State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Ask Questions about Fees & Commissions  What are the commissions, fees and penalties relative to me investing with you and your company?  How do I get my money back if I change my mind? Is there any cost? State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Ask Referral Questions  Would you be willing to explain this offer to my stockbroker (or banker, lawyer, or trusted financial adviser)?  Before I sign I will need some time to ask around for another opinion, will that be fine? State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

If you believe you may be a victim of investment fraud or a securities law violation contact our Enforcement Branch. (808) 58SCAMS Toll Free 877-HI SCAMS State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

How we can help If there’s a violation, we fine the violator, in some circumstances the violators are barred from the industry and we try to get some money back for you. Sometimes, we will refer the case to the Criminal Authorities.If there’s a violation, we fine the violator, in some circumstances the violators are barred from the industry and we try to get some money back for you. Sometimes, we will refer the case to the Criminal Authorities. It’s all CONFIDENTIAL in the investigation stage.It’s all CONFIDENTIAL in the investigation stage. State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

How we can help  When you call, provide as much information as possible.  We need you to report fraud or other state securities violations to us by calling: 58SCAMS ( ) Toll Free 877-HI SCAMS State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

How we can help You can verify if your broker dealer and/or investment adviser is registered in Hawaii through our Compliance Branch. (808) State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

When you call have -  the name of the firm  the individual’s first name  the individual’s last name  the individual’s middle initial (if available). (808) State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

REMEMBER: “DON’T BE A VICTIM” Ask questions and contact the State DCCA Securities Branch before you sign any documents, write a check or turn over your retirement savings! State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Protect your nest egg today! State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

FOR MORE INFORMATION Contact Our Office: State Of Hawaii Department Of Commerce & Consumer Affairs, Office of the Securities Commissioner 335 Merchant Street Honolulu, HI Website: To Report Investment Fraud call 58SCAMS or TOLL FREE HI SCAMS State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program