1. Ask and Check: Using Social Influence to Combat Investment Fraud SFEPD Financial Literacy Leadership Conference – October 3, 2011 Investor Protection Campaign for Older Investors

2. Common Features of Scams ►Scams are creative and consistently changing –Disaster Relief –Green Energy –Oil & Gas –“China” Stocks –Bird Flu –Terrorism ►New distribution channels are constantly being created –Seminars –Email & Internet –Direct Mail –Word of Mouth –Telephone –Text Messages –Answering Machines

3. Moving Beyond Warning Campaigns Educating Campaigns Warning Campaigns Specific Generic Reactive Proactive Short-term Long-term Information-based Skills-based Source: OECD, Examining Consumer Policy: A Report On Consumer Information Campaigns Concerning Scams (2005) Investor alerts and warning campaigns have limited focus.

4. Major Research ►Off the Hook (2003) USDOJ/AARP. A survey of 502 general population and 132 investment fraud victims. ►Investor Fraud Study (2006) FINRA/WISE Senior Services. A survey of 499 general population and 71 investment fraud victims. ►Stolen Futures (2007) AARP Washington. A survey of 258 general population and 125 investment fraud victims. ►National Investor Risk Behavior Study (2007) FINRA and AARP. A survey of 371 general population and 101 investment fraud victims.

5. Who is Most Victimized? ►Male ►55-65 years old ►More financially literate ►College-educated ►Self reliant ►Recent change in financial or health status ►Risk-takers Victim demographic trends:

6. Key Risk Factors ►Own high-risk investments ►Relying on friends, family, co-workers for advice ►Open to new investment information ►Failing to check background and registration of financial professional and product ►Inability to spot persuasion used by fraudsters

7. ► Scam pitches are tailored to the “hot buttons” of targets ► An investment fraud pitch is full of influence Analysis of hundreds of undercover fraud tapes for Off the Hook Again: Understanding Why the Elderly Are Victimized by Economic Fraud Crimes (2006) Fraud Weapon – Social Influence

8. Investor Protection Strategy Teach Investors to: ►Know that are vulnerable ►Recognize persuasion techniques ►Take simple, highly protective steps –Ask questions –Check answers

9. Outsmarting Investment Fraud Curriculum ►Outsmarting Investment Fraud –Understanding Fraud Risk –Recognizing Persuasion Tactics used in Fraud –Preventing Investment Fraud ►Incorporates moderated presentation, videos, and learning activities & exercises ►Full version runs 60 minutes; adapted to range from 20-60 minutes in different settings with varying audio-visual capacity ►Call to Action: Deputizes participants to warn others

10. Accepting Vulnerability – Risk Meter Are you a high-risk candidate for fraud? ►12 Simple Questions ►Research-based ►Identifies Areas of Concern for You ►Provides Detailed Explanations and Resources www.SaveAndInvest.org/meters/risk

11. 11 Resisting Influence – Spotting Persuasion Most Frequently Used Tactics ►Phantom Riches: Dangling the prospect of wealth; something you want but can’t have ►Source Credibility: It is better to deal with credible people or individuals in positions of authority ►Social Consensus: If everybody wants it, it must be good ►Reciprocity: Doing a small favor in return for a big favor ►Scarcity: If something is rare or scarce, it must be more valuable

12. Smart Shopping Network

14. ►Those who counter-argue and actively question a communication are less persuaded ►Interviews of cons reveal that they do not like to be questioned ►Ask and check the registration status of the professional and investment. ►ASK if they are licensed to sell the investment and if the product is registered ►CHECK that they are licensed and the product is registered – SaveAndInvest.org or (888) 295-7422 Preventing Fraud – Ask and Check

15. Curriculum Changed Behavior Those who had been to the OIF seminar responded positively to the fraud appeal 50% less frequently than those who had not.

16. Campaign Partners ►FINRA Investor Education Foundation ►AARP ►U.S. Securities & Exchange Commission ►State Securities Regulators – Alabama, Arizona, Colorado, Florida, Maine, North Carolina, Pennsylvania, Vermont, West Virginia and Washington ►Grassroots Organizations – BetterInvesting, SAIF, Seniors vs. Crime, Crime Prevention Associations, others

17. Free Resources ►Partner Toolkit ►Curriculum CD ►Flip Charts ►Documentary DVD ►Handouts –Fighting Fraud 101 –Investor Kits –Playing Cards

18. Trick$ of the Trade

19. Before You Invest, Ask and Check SaveAndInvest.org Contact: Christine Kieffer christine.kieffer@finra.org or (202) 728-6970 christine.kieffer@finra.org