1. Investment Fraud -We represent Indiana Secretary of State Todd Rokita
-Secretary Rokita is the youngest Secretary of State in the U.S. (32 y/o) and, as the Secretary of State, he is the third-highest elected official in the state of IN.
-Secretary Rokita’s office has three main rolls:
Business Services (registers corporations, etc.)
Elections (TER is chief elections officer, voter ed., etc.)
Securities Division (this is who we represent…registrations,
enforcement, regulatory, and most recently investor ed.)

2. $40 billion Americans lose an estimated each year to investment fraud
-Why is the Securities Division and Investor Education important?
-Investment fraud is not a small problem.

3. Why? Lack of financial awareness Poor planning early in life
Low rates of return
Certificates of deposit, savings accounts, etc.
Rash decisions
“Easy money”
Too trusting
Fear
-Lack of financial awareness. -- Maybe the investors did not know who to talk to or did not know people had to be registered and held accountable.
-Poor planning early in life. -- Many investors feel that they did not have the knowledge or ability to save money early in life and are afraid that their money is going to run out.
-Low rates of return. -- When rates of return are low on “safer” investments, it drives people into the hands of “get rich quick” schemers.
-Rash decisions. -- Often, those promoting a scam will use high-pressure tactics, even telling the investor that the opportunity will be “gone after today.”
-Easy money. --Unfortunately, sometimes people see guaranteed high returns and don’t think past the dollar signs flashing in front of their eyes. If there really were a way to make money quickly without having to work too hard, almost everyone would be doing it.
-Too trusting. --Scammers are oftentimes difficult to identify because they appear reliable and trustworthy -- and that’s exactly what they use to lure investors into their scheme.
-Fear. -- Much like what was mentioned above for “poor planning” -- particularly elderly people are afraid that they are going to outlast their retirement money, and they are looking for avenues to increase their money quickly. Scammers prey on this fear as much as they do the trustworthy factor.

4. No one is immune to fraud. Anyone can become a victim.
The Victims Include...
Doctors
Lawyers
Teachers
College Students
Business People
Retired/Elderly
Although it seems impossible to believe, often the victims of investment fraud are well-educated, intelligent people -- people we often imagine would “know better” than to fall into a financial crisis or make a bad investment decision; however, as mentioned before, all too often, people can’t see past the flashing dollar signs. The victims of investment fraud include...
Doctors, lawyers, teachers, college students, wealthy business people, and frequently retired and/or elderly persons.
Investment fraud does not discriminate. Any person is vulnerable without the right information and education.
When you look at this list, you find yourself wondering what in the world led these people to make the decisions that they made. Often, scammers will make…
(Next Slide)
No one is immune to fraud. Anyone can become a victim.

5. Outrageous Promises “Double your money in ninety days!”
This is a risk-free guarantee
High reward with low risk
You are lucky to be getting in on the ground floor
…Outrageous promises similar to these:
-“Double your money in ninety days!” -- one of the most famous of investment schemers (Charles Ponzi) made this guarantee to his investors, and they bought it. He swindled people out of millions of dollars in a matter of days. Unfortunately, many of his investors never saw the money promised them.
- “This is a risk-free guarantee.” -- No investment opportunity is a sure-bet, and it should never be treated as such.
-High reward with low risk. -- Rule of thumb is: the higher the reward, the higher the risk involved.
-You’re lucky to be getting in on the ground floor -- If you really are getting in on the ground floor, you’re probably taking a big risk. “Ground floor” should be a red flag for risk.
It is important, also, to realize that people are not always duped by outrageous promises. Sometimes, they put their faith and their hard-earned money into the hands of a financial professional who commits fraud.

6. Financial Professionals
Unsuitable investments
Poor investment advice
Fraudulent broker acts
Insurance agents/unregistered agents
Financial professionals could hurt an investor in any number of ways. This includes:
-Recommending investments and opportunities that are unsuitable for a particular investor. They may for any number of reasons -- particularly if they are receiving compensation for touting the stock.
-Giving the investor ill-advised information regarding their financial condition or charging them for advice that they cannot afford.
-Other acts of fraud committed by investment professionals are not limited to these first two. Investment professionals are bound and regulated by the Indiana Securities Act. Failure to comply with the Act is cause for punishment and possibly even revokation of an agent’s securities license.
-Insurance agents will sometimes lead investors to believe that they are capable of giving investment advice. If the agent isn’t registered to give sell securities, then are not allowed to give it to you.
When looking at this information, it is important to realize that they are many good, honest investment professionals that will direct you in an honorable, trustworthy manner. It is, however, important to know that the law regulates these individuals, and they are held accountable for the work that they do. The must be registered with the Securities Division in order to be doing business in Indiana. As a registered stock broker or investment adviser, they are held accountable for their actions as set forth by the Indiana Securities Act.

7. What Can Be Done? Report suspicious or fraudulent activities
Check into the investment opportunities and the people selling them
Here are a couple of steps that you can take when making investment decisions. It is extremely important when choosing to invest your money that you have all of the information necessary to compare and contrast various opportunities so that you can make an informed investment decision on what is best for you and your money.

8. Investigate Before You Invest
What Can Be Done?
Financial
Education
Investigate Before You Invest
Financial education is our best preventative measure to investment fraud. Investor Education programs are being set up in many states across the country to try to stop these problems before they happen. When an investor loses their money, it is difficult to know whether or not they will ever see even a part of that loss returned to them. It is the hope of investor education programs that less money will be lost when investors make informed decisions and investigate before they invest their hard-earned savings.

9. Investment Myths High reward with no risk
Scams do not happen to smart people
.com companies are a sure bet
This investment is guaranteed/insured
No written information is available
No securities license or registration is necessary to sell this
- High reward with no risk -- there is always risk involved in any investment decision. The higher the possible payback, the higher the risk involved.
-Scams don’t happen to smart people -- as mentioned earlier in this presentations, the Indiana Securities Division has seen cases where educated and even wealthy people have lost tons of money to investment fraud. Doctors, lawyers, teachers…no one is immune to these scams.
-.com companies are a sure bet -- although high-tech seems to be the way to go these days, it does not guarantee that you are getting in on a great opportunity. Do your homework and know what is involved -- regardless of how “up-and-coming” it is.
-This investment is insured or guaranteed -- investment opportunities are not insured and cannot guarantee return. There is always a risk of loss involved.
-No written information is available -- any legitimate investment opportunity should have materials for you to read regarding the investment. Ask to see a prospectus and financial statements. If it is a legitimate opportunity, the person selling it should be more than happy to give you as much information as possible.
-No license is required to sell this -- They should be obliged to give you the information on why they are allowed to sell this investment to you. Call the SOS office to see it the person and the opportunity are registered with us or exempt.

10. Red Flags
This offer is only good today/this is a limited-time opportunity
Just give me your credit card and checking account number
This is only available to a select group
I get nothing out of this deal
- High-pressure sales tactics are often used in what Securities regulators call “Boiler Room” Schemes. These “here today, gone tomorrow” pitches are often just pressure tactics to get people to make a quick decision without giving them time to investigate the opportunity and change their minds.
- Never give anyone your account information.
- Saying it is available to a select group may make you feel special, like you’re getting an opportunity that others might miss. This is exactly what a good con-artist wants you to think.
- No matter who is offering the opportunity to you, they are not doing it out of the goodness of their hearts. There is always something in it for them.

11. Red Flags Do not tell anyone -- not even family
I will come to you; you don’t have to come to me
Foreign banks pay great interest rates and have no taxes associated with them
This is “insider” information
- Asking you to hide the information is a sure sign that they don’t want you to tell anyone who might be able to talk you out of it.
- This is often used to avoid postal fraud.
- While this can be true, it is riskier to invest outside of the U.S. because the opportunities are not always subject to our laws and regulations, and the “no tax” line is not always true.
- Insider information is illegal. Even if they did have it, they (and you) could get in a lot of trouble for using it.

12. Common Types of Fraud
Pyramid Schemes

13. Common Types of Fraud Ponzi Schemes International Prime Bank Schemes
Charles Ponzi
Don Pratt
International Prime Bank Schemes
Royal Meridian Bank
Affinity Fraud
The Church of God, Inc.
Promissory Notes
James Carpenter
- Ponzi Schemes -- Uses money from later investors to pay back earlier investors, also known as “Robbing Peter to pay Paul.” The scheme is named for Charles Ponzi who took money from investors, with the promise of “Double your money in 90 Days!” He thought he could take advantage of currency differences with foreign mail coupons. When it didn’t work out, he wound up using money from later investors to pay earlier ones.
Don Pratt of Indiana had a legitimate business, but when it went under, he continued to take investors’ money doing the same thing…
-Prime Bank Schemes -- Royal Meridian Bank dates back to Investors were encouraged to put their money into offshore CD’s with Royal Meridian. Although legally Royal Meridian should be registered to sell securities in the U.S., there has been no record of them in Indiana or any other state, and the investors have been unable to recover the money invested.
-Affinity Fraud -- takes advantage of a trust. The investments are touted by someone “like” you in your community -- a fellow church goer or a community leader. The Church of God, Inc. was and Indiana-based religious entity that, according the SEC, raised $85 million from the sale of notes to thousands of investors nationwide. While the money had originally been used to construct new churches, the business began to fall and they began to misrepresent their financial condition and fund speculative real estate transactions, fund losses at these failing properties, and make payments to prior investors.
Promissory Notes -- Short-term debt instruments with high interest rates. These notes are often fraudulent because the issuer may not intend or even be capable of delivering the returns promised by the sales person.
In Indiana, a gentleman named James Carpenter is currently pending trial for conspiracy to sell unregistered securities, conspiracy to act as an unregistered agent, and conspiracy to commit securities fraud.

14. Common Types of Fraud Unscrupulous Brokers Senior Fraud
Poor advice
Unsuitable investments
Senior Fraud
Variable and charitable gift annuities
Viaticals
Promissory notes
Insurance Agents/Unlicensed Agents
Any agent selling securities must be licensed through the Secretary of State Todd Rokita’s Office
Unscrupulous Brokers -- Sometimes, a broker will illegitimately cut corners or even commit outright fraud to make financial gains for themselves. When this happens, it is always at the expense of the investors that trust them.
Senior Fraud -- NASAA is calling today’s market a “perfect storm” for seniors to become victims of investment fraud. Seniors are often in fear of running out of retirement money, and with the rising cost of health care, increasing life expectancy, and volatile stock markets, they are often driven to look for “better” opportunities.
Unregistered Agents -- as mentioned earlier, insurance agents are NOT registered to sell securities in Indiana without actually having a securities license.

15. Avoiding Fraud Hang up the phone Ask questions!
Remember, those touting investments are not doing it to help you out
Contact Secretary of State Todd Rokita’s Office for information regarding the opportunity and the person offering it

16. Secretary of State Todd Rokita We Are Here to Help Hoosiers!
Fraud Hotline (800)
Website
Location
302 W. Washington St. Room E-111 Indianapolis 46204
Report Investment Fraud
Check On
Securities
Franchises
Loan Brokers
Exempt Filings
Broker Dealers
Investment Advisors
Enforcement Actions