Utah Division of Securities

Leigh Davis-Schmidt Securities Examiner

Utah Division of Securities The Securities Division enhances Utah’s business climate by protecting Utah’s investors through education, enforcement and fair regulation of Utah’s investment industry while fostering opportunities for capital formation. Utah Division of Securities Mission:

Utah Division of Securities Register Securities License Investment Professionals Conduct Compliance Examinations Educate Investors Investigate Investor Complaints Enforce State Securities Laws –Administrative & Civil Actions –Criminal Filings How Do We Accomplish This?

Utah Division of Securities Top 10 Ways to Lose Your Money

Utah Division of Securities 1.Ponzi Schemes 2.Unlicensed Individuals Selling Securities 3.Unregistered Investment Products 4.Promissory Notes 5.Senior Investment Fraud 6.High-Yield Investment Schemes 7.Internet Fraud 8.Affinity Fraud 9.Variable Annuity Sales Practices 10.Unscrupulous Brokers

Utah Division of Securities Why Is This Important To You? EVERYONE IS A TARGET!

Utah Division of Securities Ponzi Schemes Promise High Rates of Return, Little or No Risk Use Money From New Investors to Pay Earlier Investors Typically No Legitimate Business Revenue Example: 12 Daily Pro

Utah Division of Securities Unlicensed Individuals Lured by High Commissions Anyone Selling Securities Must Be Licensed - No License, No Sale

Utah Division of Securities Unregistered Investment Products Bypass Stringent State Registration & Disclosure Requirements Securities – Not Just Stocks & Bonds Investment Contracts Promissory Notes Viatical Settlements Promise High Returns, Little or No Risk

Utah Division of Securities Investor’s Name

Utah Division of Securities Promissory Notes Typically Issued by Little Known or Non-Existent Companies Promise High Returns, Little or No Risk Insurance Agents Often Targeted to Promote These Notes Example: Beverly Hills Dev. Corp.

Utah Division of Securities Investor’s Name 10% Per Annum Foreign Currency

Utah Division of Securities Senior Investment Fraud Often Claim to be “Senior Specialists” Certified Elder Planning Specialists (The National Registry of Elder Planning Advisors) Senior Benefit Centers Network Senior Financial Survival Workshop Certified Senior Advisors Sundance Public Relations Ghost Written Books – Alligator Proofing Your Estate Newsletters & Brochures – Senior Times

Utah Division of Securities High-Yield Investment Schemes Promise Double or Triple-Digit Returns Through Access to “Risk Free Guaranteed High-Yield Instruments” Prime Bank Schemes Access to Investment Portfolios of the World’s Elite Banks “Secret Off-Shore Trading Programs”

Utah Division of Securities IMF Sponsored High Yield Investment Program Not A Solicitation $600 Billion In 10 Days

Utah Division of Securities 665% In 12 Months Secret Currency Beyond Reach of Government Used By World’s Wealthy

Utah Division of Securities Internet Fraud , Web Sites, Instant Messaging, Chat Rooms (Hidden Identities) $122 Million in Losses in 2002 More Than 125,000 Victims and Over $100 Million in Losses in 2003 Very Little Money is Ever Recovered

Utah Division of Securities Affinity Fraud “I am also a member of (insert your religious, ethnic, professional or community-based organization)” Same “deal” was made with a prominent leader of your organization – “name dropping” Example: Tooele Community

Utah Division of Securities Variable Annuity Sales Practices High Surrender Charges Higher Costs than Alternative Investments Benefits Cost Extra Steep Sales Commission Paid to Agents Long-Term Investment (10 Years or More) May Be Unsuitable for Many Retirees

Utah Division of Securities Use Introductory Seminars Offer Free Meal “Probe, Then Disturb, Then Enhance The Problem” Annuity University Wall Street Journal July 2, 2002

Utah Division of Securities “ You’re there to solve their problems, but you have to create those problems first – No Problem, No Sale” “Tell them you can protect their life savings from nursing- home and Medicare seizure of assets. They don’t know what that is, but it sounds scary…it’s about putting a pitchfork in their chest.” “Show them their finances are all screwed up so that they think Oh, no! I’ve done it all wrong – this will make you money” Annuity University Wall Street Journal July 2, 2002

Utah Division of Securities

Unscrupulous Brokers Unsuitable Investment Recommendations Excessive Trading in Client Accounts Unauthorized Trading Guaranteeing Clients Against Loss Borrowing Money From Clients Example: Christofferson

Utah Division of Securities Common Threads Promise of High Returns Promise of Little or No Risk Prey on Investors’ Trust Investors Don’t Ask Questions

Utah Division of Securities Women-Specific Issues Flatter Factor Romantic Interest Too Trusting Afraid to Confront or Question Examples: –Scharbach –Simper –Deussen

Utah Division of Securities So, What Can You Do?

Utah Division of Securities Ask Questions – Be An Informed Investor Check Out Strangers Touting Strange Deals Watch Out For Salespeople Who –Prey On Your Fears –Try To Rush Your Decision Don’t Be Afraid To Hang Up The Phone Don’t Put All Of Your Eggs In One Basket Monitor Your Investments - Always Stay In Charge Of Your Money

Utah Division of Securities Get Everything In Writing And Keep A Copy Of All Documents Risk No More Than You Can Afford To Lose If You Don’t Understand The Investment - Avoid It!!! Report Misconduct, Fraud Or Abuse To The Division Pass This Information On To Your Family, Your Friends, And Others

Utah Division of Securities REMEMBER: Investigate EVERYTHING Before You Invest

Utah Division of Securities Utah Division of Securities SAFE (7233) (801)