Utah Division of Securities. Leigh Davis-Schmidt Securities Examiner.

Utah Division of Securities


Leigh Davis-SchmidtSecurities Examiner


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:


• 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?


Top 10 Ways to Lose Your Money


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


Why Is This Important To You?

EVERYONE IS A TARGET!


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• Example: 12 Daily Pro


Unlicensed Individuals

• Lured by High Commissions

• Anyone Selling Securities Must Be Licensed - No License, No Sale


Unregistered Investment Products

• Bypass Stringent State Registration & Disclosure Requirements

• Securities – Not Just Stocks & Bonds• Investment Contracts• Promissory Notes• Viatical Settlements

• Promise High Returns, Little or No Risk


Investor’s Name


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

• Example: Beverly Hills Dev. Corp.


Investor’s Name

10% Per AnnumForeign Currency


Senior Investment Fraud• Often Claim to be “Senior Specialists”

•Certified Elder Planning Specialists (The National Registry of Elder Planning Advisors)

•Senior Benefit Centers Network •Senior Financial Survival Workshop•Certified Senior Advisors

• Sundance Public Relations•Ghost Written Books – Alligator Proofing

Your Estate•Newsletters & Brochures – Senior Times


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”


IMF Sponsored

High Yield Investment Program

Not A Solicitation

$600 Billion In 10 Days


665% In 12 Months

Secret Currency

Beyond Reach of Government

Used By World’s Wealthy


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


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


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


• Use Introductory Seminars

• Offer Free Meal

• “Probe, Then Disturb, Then Enhance The Problem”

Annuity University

Wall Street Journal July 2, 2002


• “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


Unscrupulous Brokers

• Unsuitable Investment Recommendations

• Excessive Trading in Client Accounts

• Unauthorized Trading

• Guaranteeing Clients Against Loss

• Borrowing Money From Clients

• Example: Christofferson


Common Threads

• Promise of High Returns

• Promise of Little or No Risk

• Prey on Investors’ Trust

• Investors Don’t Ask Questions


Women-Specific Issues

• Flatter Factor

• Romantic Interest

• Too Trusting

• Afraid to Confront or Question

• Examples:– Scharbach

– Simper

– Deussen


So, What Can You Do?


• 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


• 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


REMEMBER:

Investigate EVERYTHING

Before You Invest


Utah Division of Securities1-800-721-SAFE (7233)

(801) 530-6600www.securities.utah.gov

Utah Division of Securities. Leigh Davis-Schmidt Securities Examiner.

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