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Washington State Securities Divis

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					          INTRODUCTION

    Dept. of Financial Institutions
 Martin Cordell,
  Chief of Enforcement
 Kristen Culbert,
  Financial Legal Examiner

                                      1
            Overview
 Who  is DFI
 Top 10 Investment Scams
 Tips on Avoiding Becoming a
  Victim
 What to Do When There is a
  Problem
                                2
                              DFI
   Division of Banks
       Regulates commercial banks, trust companies, savings
        banks, savings and loan associations
   Division of Consumer Services
       Licenses and regulates business activities of consumer
        loan companies, mortgage brokers, check cashers and
        payday lenders, and money service providers
   Division of Credit Unions
       Regulates state-chartered credit unions licensed to operate
        in Washington
   Securities Division
                                                                  3
       Securities Division
 Review  Securities Offerings, Franchise
  Offerings, Business Opportunity Offerings
 License and Examine Broker-Dealers and
  Investment Advisors
 Investigate Complaints, Take Enforcement
  Action
 Provide assistance to small businesses
 Investor education

                                          4
        Securities Division-Enforcement Section

   Cease and desist orders
   Criminal referrals
   Work in conjunction with other law enforcement
    agencies,
      Local Police
      Local County Prosecutor
      FBI
      US Postal Inspectors
      IRS Criminal Division
      US Attorney’s Office
                                                     5
                 Top 10 Scams
   1. Ponzi Schemes
       The premise is simple: pay early investors with
        money raised from later investors.
   2. Unlicensed Individuals Selling Securities
       Anyone selling investments without a valid
        securities license should be a red flag for
        investors.


                                                          6
                    Top 10 Scams
   3. Unregistered Investment Products
       Sales of investment contracts that bypass stringent
        state registration requirements and promise high
        returns with little or no risk.
   4. Promissory Notes
     Misconception that a promissory note is not a
      security – not true if the funds are used for a
      business venture or other investment purpose.
     Often times used by the fraudster in an attempt to
      circumvent securities regulations.
                                                         7
                  Top 10 Scams
   5. Senior Investment Fraud
      Because of a lifetime of savings, seniors are
       targeted by con artists.
   6. High-Yield Investment Schemes
      Con artists offer promises of triple-digit returns in
       “risk free guaranteed high yield instruments,”
       prime bank notes/debentures, secret private
       offshore trading programs or something equally
       deceptive.
                                                          8
                  Top 10 Scams
   7. Internet Fraud
      Stock promoters use online “boiler rooms,”
       instant messaging, and fake websites to lure
       investors into “pump-and-dump” stock schemes.
   8. Affinity Fraud
      Con artists are increasingly targeting religious,
       ethnic, cultural and professional groups.
      People won’t complain, level of trust already
       established.

                                                           9
                 Top 10 Scams
   9. Reload Scams
      Targets prior victims of scams
      Promises victims help in the recovery of
       lost investments
       • By investing in a new product
       • Pay legal fees to recover lost money
       • Pay taxes or fees for money already recovered
     Usually   done by telephone

                                                     10
                 Top 10 Scams
   10. Oil and Gas Scams
     With oil prices at record levels and continued
      Middle East instability, con artists may renew
      schemes promising quick profits in oil and gas
      ventures.
     Usually telephone solicitation.




                                                       11
Avoid Being Victimized
   Call your state securities agency to learn more
    about a securities salesperson and their firm.
    Ask:
      if they are registered to do business in the state,
      the disciplinary record of the firm and its
       representative,
      if any complaints have been received, and
      if they under active investigation.




                                                             12
Check out your broker
   www.nasd.com/brokercheck
    10 years of employment history, approved
    licenses and exams, criminal and felony
    charges and convictions, investment-related
    misdemeanor charges and convictions,
    disciplinary actions and investigations by
    regulators, investment-related civil actions,
    consumer-initiated complaints and arbitration
    proceedings.
                                                13
Avoid Being Victimized-
Investigate before Investing

    Educate yourself
      Library

      Government and Non-profit Agencies

      Financial Publications

      Internet



    Consult with a professional or trusted friend
      Consider getting a second or third opinion


                                                     14
Avoid Being Victimized
   Is offer of investment registered or subject of
    complaints?
         • Securities & Exchange Commission
         • DFI
   Ask questions about hot stock tips:
      where is the company traded,

      is it listed in the stock tables printed in your local
       newspaper, and
      who is making a market in the stock?
                                                           15
Avoid being victimized
   Read prospectus carefully
     Do you understand the risks?

     How investment works?



   Red Flags
     Unsolicited phone calls or email

     High pressure tactics

     Inside information
                                         16
What to do with a problem
   Consult with an attorney
   Send copies of your complaint to regulators.
      DFI 1-877-RING-DFI or www.dfi.wa.gov

      Securities & Exchange Commission at
       www.sec.gov
      NASD for licensed broker-dealers (240) 386-
       HELP.
      Other state regulators’ contact info at the North
       American Securities Administrators Association
       at (202) 737-0900 or www.nasaa.org                17
Grandma’s Advice
A     penny saved is a penny earned

 Never    put all your eggs in one basket

 If it’s too good to be true….
  It’s too good to be true.

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