Leigh Davis-Schmidt Securities Examiner
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Transcript of Leigh Davis-Schmidt Securities Examiner
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Utah Division of Securities
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Utah Division of Securities
Leigh Davis-SchmidtSecurities Examiner
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Utah Division of Securities
The Securities Division enhances Utah’s business climate by protecting Utah’s investors through education, enforcement and fair regulation of Utah’s investment industry while fostering opportunities for capital formation.
Utah Division of Securities Mission:
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Utah Division of Securities
• Register Securities• License Investment Professionals• Conduct Compliance Examinations• Educate Investors• Investigate Investor Complaints• Enforce State Securities Laws
– Administrative & Civil Actions– Criminal Filings
How Do We Accomplish This?
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Utah Division of Securities
Top 10 Ways to Lose Your Money
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Utah Division of Securities
1. Ponzi Schemes2. Unlicensed Individuals Selling Securities3. Unregistered Investment Products4. Promissory Notes5. Senior Investment Fraud6. High-Yield Investment Schemes7. Internet Fraud8. Affinity Fraud9. Variable Annuity Sales Practices10. Unscrupulous Brokers
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Utah Division of Securities
Why Is This Important To You?ANYONE AT ANY AGE CAN BE
SCAMMED – EVERYONE IS A TARGET!
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Utah Division of Securities
Ponzi Schemes
• Promise High Rates of Return, Little or No Risk
• Use Money From New Investors to Pay Earlier Investors
• Typically No Legitimate Business Revenue
• Examples: 12 Daily Pro, Real Estate Dev.
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Utah Division of Securities
Unlicensed Individuals
• Lured by High Commissions
• Anyone Selling Securities Must Be Licensed - No License, No Sale
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Utah Division of Securities
Unregistered Investment Products
• Bypass Stringent State Registration & Disclosure Requirements
• Securities – Not Just Stocks & Bonds• Promise High Returns, Little or No Risk
• Example: American-Dairy.com (Paul Schwenke)
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Utah Division of Securities
Investor’s Name
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Utah Division of Securities
Promissory Notes
• Typically Issued by Little Known or Non-Existent Companies
• Promise High Returns, Little or No Risk• Insurance Agents Often Targeted to
Promote These Notes• Examples: The Millionaire Investors Group,
Autorama, Winning in the Cash Flow Business
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Utah Division of Securities
Investor’s Name
10% Per AnnumForeign Currency
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Utah Division of Securities
Senior Investment Fraud
• 15% of The U.S. Population, 30% of Fraud Victims
• Why?•Baby Boomers Have Over $8.5
Trillion in Investable Assets•10,000 Seniors Will Turn 60 Every
Day Over The Next 20 Years
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Utah Division of Securities
High-Yield Investment Schemes
• Promise Double or Triple-Digit Returns Through Access to “Risk Free Guaranteed High-Yield Instruments”
• Prime Bank Schemes • Access to Investment Portfolios of the World’s Elite
Banks
• “Secret Off-Shore Trading Programs”
• Example: Mowen (Isagenix)
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Utah Division of Securities
IMF Sponsored
High Yield Investment Program
Not A Solicitation
$600 Billion In 10 Days
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Utah Division of Securities
665% In 12 Months
Secret Currency
Beyond Reach of Government
Used By World’s Wealthy
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Utah Division of Securities
Internet Fraud
• E-mail, Web Sites, Instant Messaging, Chat Rooms (Hidden Identities)
• $122 Million in Losses in 2002
• More Than 125,000 Victims and Over $100 Million in Losses in 2003
• Very Little Money is Ever Recovered
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Utah Division of Securities
Affinity Fraud
• “I am also a member of (insert your religious, ethnic, professional or community-based organization)”
• Same “deal” was made with a prominent leader of your organization – “name dropping”
• Example: Tooele Community
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Utah Division of Securities
Variable Annuity Sales Practices
• High Surrender Charges
• Higher Costs than Alternative Investments
• Benefits Cost Extra
• Steep Sales Commission Paid to Agents
• Long-Term Investment (10 Years or More)
• May Be Unsuitable for Many Retirees
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Utah Division of Securities
• Use Introductory Seminars
• Offer Free Meal
• “Probe, Then Disturb, Then Enhance The Problem”
Annuity University
Wall Street Journal July 2, 2002
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Utah Division of Securities
• “You’re there to solve their problems, but you have to create those problems first – No Problem, No Sale”
• “Tell them you can protect their life savings from nursing-home and Medicare seizure of assets. They don’t know what that is, but it sounds scary…it’s about putting a pitchfork in their chest.”
• “Show them their finances are all screwed up so that they think Oh, no! I’ve done it all wrong – this will make you money”
Annuity University
Wall Street Journal July 2, 2002
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Utah Division of Securities
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Utah Division of Securities
Unscrupulous Brokers• Unsuitable Investment Recommendations • Excessive Trading in Client Accounts
• Unauthorized Trading
• Guaranteeing Clients Against Loss
• Borrowing Money From Clients
• Example: Christofferson
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Utah Division of Securities
Common Threads
• Promise of High Returns
• Promise of Little or No Risk
• Prey on Investors’ Trust
• Investors Don’t Ask Questions
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Utah Division of Securities
Other Threats to Investors• Boiler Rooms
• Reload Scams
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Utah Division of Securities
Typical Boiler Room• Locked Doors
– To Keep Customers & Regulators Out
• 157,000 Telephone Calls– 50 Cold Callers – Stratton Oakmont - 13,000 Calls Per Month To Utah
Citizens
• Scam People Located Out Of State– More Difficult For Investors To Complain– More Difficult For Out-of-State Regulators To
Conduct Examinations
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Utah Division of Securities
Born To Steal By Gary Weiss“I would never call anybody who lived in Jersey or New York. Never. My best states were Utah, Texas, Arizona, Virginia. Michigan was one of my favorite states too. Michigan was good. Stupid people up in Michigan. California too. Not Los Angles but on the outskirts of California. Sacramento. Utah was my favorite state. I think that was my top state. Because they were completely f***ing retarded. They have like nine wives, they’re Mormons. They’re retards. You call them from New York, and they’re like, ‘Where are you?’ And I’d say, ‘I’m a spit throw away from the New York Stock Exchange.’ And they’d say, ‘Really! How is it up there in New York?”
“They’re fascinated by the whole concept of it. Utah, Arizona, Texas...” [p. 93]
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Utah Division of Securities
What Is A Reload Scam?
Once A Victim, Twice A Victim… • “I promise, you’ll make your money back
if only you’ll invest in…”• Promoter's Will Not Only Sell A Scam
To The Same Person Twice, They Share Their List of “Suckers” With Other Promoters
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Utah Division of Securities
So, What Can You Do?
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Utah Division of Securities
• Ask Questions – Be An Informed Investor
• Check Out Strangers Touting Strange Deals
• Watch Out For Salespeople Who– Prey On Your Fears – Try To Rush Your Decision
• Don’t Be Afraid To Hang Up The Phone
• Don’t Put All Of Your Eggs In One Basket
• Monitor Your Investments - Always Stay In Charge Of Your Money
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Utah Division of Securities
• Get Everything In Writing And Keep A Copy Of All Documents
• Risk No More Than You Can Afford To Lose
• If You Don’t Understand The Investment - Avoid It!!!
• Report Misconduct, Fraud Or Abuse To The Division
• Pass This Information On To Your Family, Your Friends, And Others
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Utah Division of Securities
REMEMBER:
Investigate EVERYTHING
Before You Invest
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Utah Division of Securities
Utah Division of Securities1-800-721-SAFE (7233)
(801) 530-6600www.securities.utah.gov