1. Investment Schemes Teacher Institute 2016

2. Oklahoma Securities Commission
Our mission is Oklahoma investor protection through the administration and enforcement of the Oklahoma Uniform Securities Act of 2004.

3. Uniform Securities Act of 2004
Prohibits fraud in securities transactions
Requires the registration of:
Broker-dealers and agents
Investment advisers and investment adviser representatives
Securities
Investor Education

4. Purpose of the Presentation
Identify common investment schemes
Help you to avoid becoming a victim of investment fraud.
Investigate BEFORE you Invest

5. Investing Risk Interest rate risk Business failure risk
Market price risk
Inflation risk
Political risk
Fraud risk
Investor Protection Trust
The Basics of Savings and Investing: Investor Education 2020
Unit 2

6. How do investors encounter fraud?
Online
Telephone
Personal visits
Newspaper advertisements
Referrals from friends
Mail

7. How do you become a victim?
Someone gains your confidence and trust
Promoter gains access to your financial information
Promoter uses religion to persuade you to act
Promoter guarantees safety of your investment

8. Major Types of Investment Fraud
Online Fraud
Affinity Fraud
Pyramid Scheme
Ponzi Scheme
Stock Swindles
Investor Protection Trust
The Basics of Savings and Investing: Investor Education 2020
Unit 4

9. Online Fraud
Social networking – via Facebook, Twitter, Linkend In, eHarmony, etc.
Red Flags
Promises of high returns and no risk
Offshore operations
E-Currency sites
Bonus to recruit friends
Professional websites with little information
No written information
Investor Protection Trust
The Basics of Savings and Investing: Investor Education 2020
Unit 4

10. Affinity Fraud
A investment scheme where the perpetrator preys upon members of an identifiable group.
Examples
Church Group
Civic Club members

11. Pyramid Scheme
Operates on the principle that each member of a group will receive a profit or a cut for recruiting new members to join the scheme.
No revenues from sale of goods or services, cash comes from enlisting new investors who pay for the right to enlist more downstream investors.
Attempts usually made to disguise as a multi-level marketing business.

12. Ponzi Schemes
Early investors are paid off with money from new investors
May operate for a long time before the promoter disappears
For every investor who makes money, another investor losses money
Majority of our cases involve some aspect of a Ponzi Scheme

13. Stock Swindles
Securities of promotional start-up companies with untested products, no assets, employees or business plan
Brokers take companies and hype them to drive up their market value
Insiders get cheap stock and after price is raised dump the stock on the market for a profit
Stock prices collapse

14. Common Methods Used to Perpetrate Investment Schemes
Boiler Rooms
Promissory Notes
Viatical Settlements

15. Boiler Rooms Telemarketing Scripted sales pitches
Sales pitches with slick talk and no risk
Demand for immediate action
Get rich quick
No business location disclosure
Confusing or conflicting facts
Usually involves exotic businesses like precious metals or oil and gas

16. Promissory Notes
Short-tem debt instruments issued by little known or non-existent companies promising high returns-upwards of 15 percent monthly
Minimal risk or no risk
Conflicting and/or confusing terms

17. Viatical Settlements
Investments in the life insurance policy of a terminally ill person
Unrealistic high rates of return
High risk investment
Difficult to accurately predict life expectancy
Sales person has little knowledge of high-yield investment

18. Oklahoma Business Sales Act
What is a Business Opportunity?
Franchise
Distributorship
Multi-level marketing business
Work at home business
Vending machine business

19. Business Opportunity Fraud
Easy Money- Promoter promises 100%, “sure-fire” advice and assistance in selling goods or services to an untapped market while the person works from home
Preys on dreams of owning your own business
Promoter promises superior products and endless inventory, but you get slick catalogues and order forms for overpriced goods

20. Unfair Sales Practices in Investment Account
Unsuitable securities purchases
Unauthorized trading, churning, conversion
Warning signs
High pressure sales methods
Hot tips
Mismarked confirmations or new account forms
Incorrect net worth or income
Incorrect investment goals
Trades designated as “unsolicited”
Requests to send money directly to agent
Agent asks to personally deliver distribution checks rather than you receiving them in the mail
Agent requests you make your checks directly payable to the agent not the firm

21. How to protect yourself
Stop and think before acting
Study the deal – and get input
Stick to what is clearly understood
Apply critical-thinking skills

22. Ask yourself the following
Why am I interested in this deal?
Do I want to gamble?
Can I afford to lose my entire investment?
Do I understand the risk of loss?
What is the basis for the purchase price?
What do I know about management?
Where is the business located and how long has it been in business?

23. Investigate BEFORE you Invest
Search the company and sales person online
Read as much as you can about the investment
Obtain independent advice from someone who understands the investment
Call the Oklahoma Securities Commission

24. Oklahoma Securities Commission Invest Ed®
Documentaries
PSAs
Radio Minutes

25. Oklahoma Department of Securities
(405)
Case search
Registration
Complaints
News