STATE OF NEW JERSEYOffice of the Attorney GeneralBureau of Securities

Protecting Your Finances

How To Avoid

Investment Fraud And Scams

Bewareof Great Investment

“Opportunities”Examples: Investment is off-shore, tax-sheltered venture Use of terms “Guaranteed” or “Risk-Free” Calls that are unsolicited – told you can get in at

ground level, claims of inside information Promise of high returns Told not to tell banker, lawyer, family members,

etc., since the investment was usually only sold to large international banks but “YOU could get in on it.”

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Why Seniors Are Targets of Fraud

Does the following fit you or someone you know?

Often home to answer the phone or door Involved in community, social or church groups Alone during the day Health problems–reliance on others Dissatisfied with interest rates and returns Trusting – big for the scam artist who can appear

attentive, nice, or a friend of a friend

LIFESTYLE

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Why Seniors Are Targets of FraudHow They Get To You …They gain your trust and use your lifestyle to do so by: being Convincing befriending you or a friend or relative to get to others Being a “nice guy” Offering to look at your finances and help you with

them Providing false credentials or easily produced

materials

Remember, their job/profession is to know how to steal from you. They are professionals- like you – but they are in a profession that is illegal and conducted without conscience.

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Cold calling and Cold calling and high pressure sales tacticshigh pressure sales tactics

High High unsubstantiated claimsunsubstantiated claims about future earnings about future earnings

Claims about Claims about proven, no-risk, minimal riskproven, no-risk, minimal risk or guaranteed or guaranteed

Reliance on references Reliance on references they have hand-pickedthey have hand-picked – phone – phone contacts, toocontacts, too

Evasive answersEvasive answers and lack of information and lack of information

Intimidation and Intimidation and made to feel embarrassedmade to feel embarrassed

Pressure to Pressure to do it “nowdo it “now” or you’ll lose the chance” or you’ll lose the chance

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KKnow the Warning Signs:now the Warning Signs:

KKnow the Warning Signs:now the Warning Signs:

Might use your Might use your anti-taxanti-tax or anti-government sentiments to sell to or anti-government sentiments to sell to youyou

Offer Offer might includemight include ability to avoid paying taxability to avoid paying tax and keep your and keep your money outside of the country where government won’t be money outside of the country where government won’t be able to get itable to get it

Usually offers very attractive rate of returnUsually offers very attractive rate of return

Again, Again, told to keep it a secrettold to keep it a secret – “don’t tell” family, your lawyer, – “don’t tell” family, your lawyer, etc.etc.

SScam artists use can phony references and offer information on cam artists use can phony references and offer information on slick documents but with fraudulent credentials and logos. It’s slick documents but with fraudulent credentials and logos. It’s not easy to examine offers thoroughly sometimes, HOWEVER, not easy to examine offers thoroughly sometimes, HOWEVER, IFIF you take the time to research the information you were you take the time to research the information you were given and given and call the Bureau of Securities for background call the Bureau of Securities for background information,information, you could prevent a loss that most likely - will you could prevent a loss that most likely - will be be unrecoverable.unrecoverable.

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What Should I Watch Out For?

Any financial transaction completed on your behalf or without your consent

Transactions for which you have no record

Someone who promises or guarantees a high return or a future price

Anyone asking you to pre-sign a blank document

Guarantees of any kind or promises to refund purchase price

Failure to provide a prospectus

Secretive behavior or requests for silence

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What Will An Advisor, Broker Or

Broker-Dealer Ask Me?To know you as a client, the following will be asked: Age Occupation Investment Objectives Annual Income and Net Worth Tolerance for Risk Your current knowledge and experience with

investments

Always ask how the investment is suitable for you, based upon the above information.

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Quick Results – impress investorsIt is common for victims to receive payments from

their investment within a short period of time. After you have developed confidence in the person selling

the investment, you, the investor, may choose to invest more money in order to be able to enjoy the same percentage return, but, on an even larger investment. Scammers, then, will disappear with all of your money.

Where does the money come from? A fraud operator will use money from later investors to pay

returns to earlier investors. By continuing this way, they can pay handsome returns while keeping the majority of the invested money for themselves. In time, the later investors get nothing.

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No Return Calls Or “The Check Is In The Mail” Beware when you can’t reach the person who sold

you the investment Beware when you are repeatedly told that your

investment dollars are being mailed to you but… the check never arrives

Beware when instead of accepting your request to get back your investment, you are told not to sell because you are missing out on a good deal and better things are going to happen, so, they attempt to talk you into investing more

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The Attractiveness of MembershipThere is a certain satisfaction in investing in a secret

product that has made wealthy people even richer. It seems to have credibility simply because it’s a secret. You’re told not to tell anyone because it would collapse if it were made public and no one wants it to collapse – especially you, if you did invest.

Many investment scams are intentionally made to seem complex and not easily understood, making the scam artist appear to be an expert, leaving you to rely on their advise and expertise.

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Twelve Tips To Help Protect You and Your Money1) Ask questions and make sure your questions are answered.

2) Takes notes of every contact with the person selling you the investment, including full name, date and time.

3) If you feel intimidated or pressured, consider a new agent.

4) Don’t assume the person is an “expert.”

5) Don’t be drawn in by a well-dressed, confident person - scam artists are aware of the importance of first impression.

6) Be aware that your Bank, in addition to selling more than the traditional Bank products, is able to sell annuities and securities through affiliated companies.

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Twelve Tips To Help Protect You and Your Money continued7) Always get written documentation – keep copies of all documents

and never accept a verbal contract - even if it’s family. Remember, it business!

8) Never sign anything before you read it carefully.

9) Be sure you understand what is written, if not, contact a lawyer.

10) Don’t be pressured into making a rushed decision.

11) Before you invest, call the Bureau of Securities for credential check and background information on the person selling the investment.

12) Make sure the person you are dealing with clearly states which role they are representing, i.e., insurance agent, investment advisor or securities agent. In other words, “Who am I dealing with?”

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What Do You Do If You Suspect Fraud

Or Have An Inquiry? Contact your representative to see if your questions can be answered to your satisfaction.

If you do not receive an answer to your satisfaction, contact the broker, manager or compliance officer.

Contact the New Jersey Bureau of Securities for fraud suspicion or if you have questions. Free background information is available.

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Have The Following Information Available, If Possible, To Make A Complaint: The name of the account holder

The account number Name of individual selling the investment Chronological list of events – if available Copies of documents (statements, letters ) Description of what you want done or what

you suspect took placeIt’s good practice to keep a written record and

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New Jersey Bureau of Securities

Contact Information Toll free: 1-866- I–Invest

or (1-866-446-8378) Website: www.njsecurities.gov

Or reach us directly by email at:

askbureauofsecurities@lps.state.nj.us

Types Of Scams:Ponzi SchemesThis scheme was named after Charles Ponzi who in the early 1900s swindled investors out of $10 million by promising 40% returns. His scheme is used today and a favorite among con artists.

How it works:Promise high returns - and pay early investors with money raised from later investors.

Only early investors make money – their success is the draw for later investors. The true winners – the con artists who set the Ponzi scheme in motion.

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Types of Scams: continued Affinity FraudCon-artists establish credibility by association

through those friendships made in groups such as social, religious or sports.

Scam artists are able to establish and use this false credibility to meet others and then can offer special deals or secretive investments because you are somehow – special.

Types of Scams: continued

Promissory Notes These are short-term debt investments

Promissory notes are issued by little known or sometimes, non-existent companies, promising high returns, for example 15% monthly – “with little or no risk!”

The notes can be vehicles for fraud when the issuer – doesn’t have the capability of delivering the return or simply doesn’t exist.

Information that you can obtain from the Bureau:Central Registration Depository report (CRD or IARD)

A national database that provides the regulatory history and licensing credentials of broker-dealers, investment advisers and over 500,000 registered representatives.

YOU can get information that includes complaint and disciplinary history. YOU can also obtain their employment history. This means that you can check on any registered representative or investment adviser that you are planning to work with.

Thank you for attending and for checking with the NJ Bureau of Securities in the future before you invest with someone new or in a new investment. If you have a complaint or suspect something may not be right, call

the Bureau 1-866-i-invest One of our investigators will pick up or if not immediately available, you will get a call back!!!

Speaker’s Bureau

Debora Whipple Investor Education Director

Office of the Attorney General New Jersey Bureau of Securities

973-504-3615

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