1. Ask and Check: Using Social Influence to Combat Investment Fraud NASACT Annual Conference – August 15, 2011 Investor Protection Campaign for Older Investors

2. FINRA Investor Education Foundation Established in December 2003 Natural outgrowth of FINRAs long-standing mission to protect investors Mission: To provide investors with the tools and information they need to better understand the markets and the basic principles of saving and investing. Awards grants and manages targeted projects focused on investor education and protection www.finrafoundation.org, www.SaveAndInvest.orgwww.finrafoundation.orgwww.SaveAndInvest.org

3. 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.

4. 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:

5. Methods of Solicitation Top Methods of Receiving Unsolicited Investment Offers –Free Seminars (68%) –Spam Email (64%) –Direct Mail (61%) –(Cold Calls are a distant 5 th at 27%) While few seniors purchase investment products as a result of the free seminars, males (13%) are almost twice as likely as females (7%) to invest.

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. 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

8. 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) Investment Fraud Weapon – Social Influence

9. 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.

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

11. 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

12. Resisting Influence – Spotting Persuasion Most Frequently Used Tactics Phantom Riches: Dangling the prospect of wealth; something you want but cant 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

13. 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

14. 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

15. Recruit investors to attend one of two workshops. Deliver new curriculum to the first group, then put both groups in a hypothetical fraud situation Measure difference in resistance to fraud appeal. Field Testing a Curriculum

16. 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.

17. Program Participants 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 – SAIF, Seniors vs. Crime, Washington State Crime Prevention Association, others

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

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