Ohio Division of Securities Your name here Fraud Prevention and Investor Protection

Ohio Division of SecuritiesOhio Division of Securities

Your name here Your name here

Fraud Prevention and Investor ProtectionFraud Prevention and Investor Protection

INVESTMENT SCAMSINVESTMENT SCAMS

Over $10 Billion a yearOver $10 Billion a year

$1 million every hour$1 million every hour

All educational and income All educational and income levelslevels

Division of SecuritiesDivision of Securities

Licensing SectionLicensing Section

Registration SectionRegistration Section

Enforcement SectionEnforcement Section

Don’t become a VictimDon’t become a Victim..

Who Needs to be Licensed?Who Needs to be Licensed?

SalespersonsSalespersons

Brokerage FirmsBrokerage Firms

Investment AdvisersInvestment Advisers

Investment Adviser RepresentativesInvestment Adviser Representatives

Central Registration Depository Central Registration Depository (CRD)(CRD)

Salesperson’s Employment HistorySalesperson’s Employment History Customer ComplaintsCustomer Complaints Pending ArbitrationPending Arbitration Criminal HistoryCriminal History Actions by other Regulatory AgenciesActions by other Regulatory Agencies

Securities Salespeople are Securities Salespeople are Prohibited from:Prohibited from:

Making False Representations of Making False Representations of Material Fact (i.e.Lying)Material Fact (i.e.Lying)

Omitting to Disclose Material Omitting to Disclose Material Information (i.e. not telling you Information (i.e. not telling you important things)important things)

Selling Unregistered SecuritiesSelling Unregistered Securities

Securities Salespeople are Securities Salespeople are Prohibited from:Prohibited from:

Recommending Unsuitable SecuritiesRecommending Unsuitable Securities Executing Unauthorized TransactionsExecuting Unauthorized Transactions Excessive Trading in Your Account Excessive Trading in Your Account

(Churning)(Churning) Charging a Price not reasonably related to Charging a Price not reasonably related to

the Market Pricethe Market Price Receiving Excessive CommissionsReceiving Excessive Commissions Guaranteeing against LossesGuaranteeing against Losses

Securities Investor Protection Securities Investor Protection Corporation (SIPC)Corporation (SIPC)

Coverage provides losses suffered by Coverage provides losses suffered by investors in the event of financial investors in the event of financial difficulties of a brokerage firm.difficulties of a brokerage firm.

Provides coverage up to $500,000.Provides coverage up to $500,000.

Registration of SecuritiesRegistration of Securities

All Securities sold in All Securities sold in the State of Ohio the State of Ohio must be Registered must be Registered or properly exempt or properly exempt from Registration.from Registration.

Enforcement SectionEnforcement Section

Investigates alleged Investigates alleged violations of the Ohio violations of the Ohio Securities Act and Securities Act and takes action when takes action when necessary.necessary.

INVESTMENTSINVESTMENTS

Characteristics of a ScamCharacteristics of a Scam

Guaranteed ReturnsGuaranteed Returns Promise of Quick Promise of Quick

ProfitsProfits Inside InformationInside Information Refusal to Send Refusal to Send

Written InformationWritten Information Calls coming from Calls coming from

Distant Cities/StatesDistant Cities/States

Reluctant to Provide Reluctant to Provide Information about Information about Salesperson or FirmSalesperson or Firm

Unusual Unusual Arrangements for Arrangements for PaymentPayment

Poorly Presented Poorly Presented Financial ProductsFinancial Products

Types of Investment FraudTypes of Investment Fraud

PONZI SchemesPONZI Schemes

Promissory NotesPromissory Notes

Viatical SettlementsViatical Settlements

Franchise/Business Franchise/Business OpportunitiesOpportunities

International International InvestingInvesting

Affinity FraudAffinity Fraud

Boiler RoomBoiler Room

QuickTime™ and aSorenson Video decompressorare needed to see this picture.

Boiler RoomsBoiler Rooms Call people in other statesCall people in other states

Mooch listsMooch lists

Answer for every objectionAnswer for every objection

Little or no riskLittle or no risk

High rate of return & secret tipsHigh rate of return & secret tips

Boiler RoomsBoiler Rooms Demand immediate actionDemand immediate action

Won’t disclose street Won’t disclose street addressaddress

Avoid U.S. mailsAvoid U.S. mails

Stall with excusesStall with excuses

Disappear when heat’s onDisappear when heat’s on

Pyramid SchemesPyramid Schemes

Pyramid Pyramid SchemeScheme

Profit or cut for Profit or cut for recruitingrecruiting

No product or No product or way too high way too high priced productpriced product

Unrealistic Unrealistic claimsclaims

Network Network MarketingMarketing

Commission on Commission on sale of productsale of product

Not paid for Not paid for recruitsrecruits

Tangible product Tangible product or serviceor service

Fair market priceFair market price

Ponzi SchemesPonzi Schemes Type of pyramid Type of pyramid

schemescheme

Use later investors’ $ to Use later investors’ $ to pay off early investors - pay off early investors - “songbirds”“songbirds”

Promise very large Promise very large returns in short timereturns in short time

Ponzi SchemesPonzi Schemes

““Can’t lose” way of making Can’t lose” way of making moneymoney

Collapses when # Collapses when # investors waiting for $> # investors waiting for $> # of new investors of new investors

““House of cards” collapsesHouse of cards” collapses

AFFINITY FRAUDAFFINITY FRAUD

What is it?What is it?

It is an investment scheme that preys It is an investment scheme that preys upon members of identifiable groups.upon members of identifiable groups.

Scam artists target the tight-knit structure Scam artists target the tight-knit structure of groups to make it less likely that a scam of groups to make it less likely that a scam will be detected and because victims are will be detected and because victims are more likely to forgive one of their own.more likely to forgive one of their own.


Swindlers who promote affinity fraud Swindlers who promote affinity fraud schemes will enlist respected leaders within a schemes will enlist respected leaders within a community or group to spread the word about community or group to spread the word about an investment deal. an investment deal.

How can you protect yourself?How can you protect yourself?


Protect yourself the same way as with Protect yourself the same way as with any other investment prospect: any other investment prospect: CHECK CHECK OUT EVERYTHINGOUT EVERYTHING -- no matter how -- no matter how trustworthy the person who brings the trustworthy the person who brings the investment opportunity to your attention investment opportunity to your attention may seem to be. may seem to be.

Fraudulent Sales TechniquesFraudulent Sales Techniques

High-pressure sales tactics.High-pressure sales tactics.

Hang up. Fraudulent telephone sales Hang up. Fraudulent telephone sales people do not respect your privacy or your people do not respect your privacy or your right to say no.right to say no.


““Decide now before the opportunity is Decide now before the opportunity is gone.”gone.”

Hang up. Refuse to be pressured. Do not Hang up. Refuse to be pressured. Do not make impulse decisions.make impulse decisions.


Promises that sound too good to be Promises that sound too good to be true.true.

Hang up. Keep in mind that a con artist Hang up. Keep in mind that a con artist will tell you whatever he or she thinks it will will tell you whatever he or she thinks it will take to close the sale. Ask to have all take to close the sale. Ask to have all claims on paper. Get the advice of claims on paper. Get the advice of experts.experts.


““The investment is risk-free.”The investment is risk-free.”

Hang up.Hang up. All investments have riskAll investments have risk.. Any Any claim to the contrary by an investment claim to the contrary by an investment promoter is a “red flag” warning of a scam.promoter is a “red flag” warning of a scam.


““There is no time to provide written There is no time to provide written information and references.”information and references.”

Tell the caller that you must have printed Tell the caller that you must have printed information in order to ask your attorney or information in order to ask your attorney or financial advisor for an opinion. Keep in financial advisor for an opinion. Keep in mind that slick brochures and glowing mind that slick brochures and glowing testimonials can be filled with falsehoods testimonials can be filled with falsehoods and distortion.and distortion.


““You have won a free gift or trip.”You have won a free gift or trip.”

The free gift or trip is a sales gimmick often The free gift or trip is a sales gimmick often used in real estate investment scams. used in real estate investment scams. Remember that “there is no free lunch,” Remember that “there is no free lunch,” particularly when it comes to investing.particularly when it comes to investing.


““We will pick up the money at your We will pick up the money at your home”home”

Hang up. The swindler is trying to force Hang up. The swindler is trying to force you to act without having time to consider you to act without having time to consider your decision.your decision.


““We need your credit card or checking We need your credit card or checking account number.”account number.”

Hang up. The swindlers want your credit Hang up. The swindlers want your credit card number so that can make fraudulent card number so that can make fraudulent purchases with your credit card purchases with your credit card information. Refuse to give financial information. Refuse to give financial information, or credit card or checking information, or credit card or checking account numbers, over the telephone account numbers, over the telephone unless you initiated the call.unless you initiated the call.

InvestorInvestor Bill of RightsBill of Rights

Right to Information on Right to Information on firm/salespersonfirm/salesperson

Right to Information on Right to Information on Risks/ObligationsRisks/Obligations

Right to good adviceRight to good advice Right to all paperworkRight to all paperwork Right to accurate Right to accurate

account statementsaccount statements

Investor Bill of RightsInvestor Bill of Rights Right to have terms Right to have terms

explainedexplained Right to your moneyRight to your money Right to prompt serviceRight to prompt service Right to know what you Right to know what you

are being charged and are being charged and whywhy

Right to State records Right to State records concerning your concerning your broker/salespersonbroker/salesperson

Warning SignsWarning Signs

High Pressure Sales Tactics - Must Act Now !High Pressure Sales Tactics - Must Act Now !

Promises of High Guaranteed ReturnsPromises of High Guaranteed Returns

Refusal to Send you Written Information Refusal to Send you Written Information Before You InvestBefore You Invest

If it sounds to good to be true..If it sounds to good to be true..

It Probably Is !!It Probably Is !!

Say Say NoNo to offers you to offers you are unsure about are unsure about

The fact of the matter is...The fact of the matter is...

IDENTITY THEFTIDENTITY THEFT

Occurs when a criminal obtains and Occurs when a criminal obtains and uses another person’s personal uses another person’s personal information to purchase goods or information to purchase goods or services fraudulently. services fraudulently.

How To Protect Yourself From How To Protect Yourself From Identity TheftIdentity Theft

Do not throw out credit card statements or Do not throw out credit card statements or other financial papers where a criminal could other financial papers where a criminal could retrieve them from the trashretrieve them from the trash

Carry only one or two credit cards in your Carry only one or two credit cards in your walletwallet

Cancel all unused credit card accountsCancel all unused credit card accounts

Keep a photocopy of all your credit cards, Keep a photocopy of all your credit cards, account numbers, expiration dates, and account numbers, expiration dates, and customer service telephone numberscustomer service telephone numbers


Never toss ATM receipts in a public trash Never toss ATM receipts in a public trash container; always take them with youcontainer; always take them with you

Watch the mail when you are expecting a Watch the mail when you are expecting a new credit card and immediately contact the new credit card and immediately contact the issuer if the credit card does not arriveissuer if the credit card does not arrive

Remove your name from the marketing lists Remove your name from the marketing lists of credit bureaus by calling the Credit of credit bureaus by calling the Credit Reporting Industry opt-out phone number at Reporting Industry opt-out phone number at (888)567-8688(888)567-8688


Be cautious of anyone calling to “confirm” Be cautious of anyone calling to “confirm” personal or financial information. Often, these personal or financial information. Often, these are criminals trying to obtain your informationare criminals trying to obtain your information

Review all your credit card and financial Review all your credit card and financial statements for any unusual activity, statements for any unusual activity, purchases, or chargespurchases, or charges

Do not carry your Social Security card in your Do not carry your Social Security card in your wallet wallet


Do not agree to any sale or offer over the telephone Do not agree to any sale or offer over the telephone when the call is unsolicited and you do not know who when the call is unsolicited and you do not know who the caller or company is. Request that promotional the caller or company is. Request that promotional material be mailed to you insteadmaterial be mailed to you instead

Be careful when using the Internet and make sure the Be careful when using the Internet and make sure the website is a secured website before you enter any website is a secured website before you enter any personal information on the site personal information on the site

Report lost or stolen credit cards to the three national Report lost or stolen credit cards to the three national credit-reporting agencies in writingcredit-reporting agencies in writing

Get a Copy of Your ReportGet a Copy of Your Report

Experian (TRW)Experian (TRW)888-397-3742888-397-3742

EquifaxEquifax800-685-1111800-685-1111

TransUnionTransUnion800-916-8800800-916-8800

What Can You Do To Protect What Can You Do To Protect Yourself?Yourself?

Take a breather.Take a breather.

Remember that the person on the other end of the Remember that the person on the other end of the phone is a phone is a salesperson.salesperson.

Know the deal. Read the material.Know the deal. Read the material.

Check out the salesperson and firmCheck out the salesperson and firm..

What Can You Do To Protect What Can You Do To Protect Yourself?Yourself?

Stick with investments you understand.Stick with investments you understand.

Do not sign papers you have not read or do not Do not sign papers you have not read or do not understand.understand.

Be skeptical!Be skeptical!

Ohio Division of SecuritiesOhio Division of Securities

Hotline:

1-800-788-1194

Documents

Ohio Division of Securities Your name here Fraud Prevention and Investor Protection