HOW TO SPOT A CON ARTIST - NASAA



Senior Presentation

HOW TO SPOT A CON ARTIST &

PROTECT YOURSELF AGAINST INVESTMENT FRAUD

PRESENTATION OUTLINE

INTRODUCTION

• Name / Title / Organization / Background

• Purpose / Objective Of Presentation

Start by explaining that there are three major lessons the audience should learn from this presentation.

PRESENTATION TITLE[ Go to next slide ]

Today’s fraud topic is “investment fraud” and we will be presenting “How to spot a Con Artist & Protect Yourself Against Investment Fraud”.

LESSON ONE

Tell them “Lesson Number One”. [ Go to next slide ]

Read the slide.

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LESSON TWO

Tell them “Lesson Number Two”

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Read the slide and explain the importance of reading everything before you sign it. If you do not understand or do not feel comfortable about what you are signing regarding your investment. STOP. Do not sign it and go get help first.

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LESSON THREE

Tell them “Lesson Number Three”

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Read the slide and explain how we can help. Call our Scam Line for help at 58SCAMS / 587-2267 and report fraud - leave a message plus your contact information so we can get back to you.

Given these 3 lessons…Today’s presentation is geared to help seniors recognize patterns and behaviors of a Con Artist and How you can protect yourself.

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THREATS TO INVESTORS

• Ponzi Schemes

Named for the swindler Charles Ponzi, who in the early 1900’s took investors for millions by promising 40% returns. The premise is simple: pay early investors with money raised from later investors. There is no real underlying business. Eventually scheme collapses and the promoters walk away rich. The “taking from Peter to pay Paul” idea.

• Unlicensed Individuals Selling Securities

Individuals who sell securities or provide investment advice are required to earn a license by passing an examination before they can offer their services to the public. Hawaii law requires all Broker-firms and their sales persons to be licensed & registered by DCCA, Business Registration Division-Securities Branch. Be sure to check with our office before you invest to be sure the seller or representative is legitimate. Remember “No license, No sale”.

• Unregistered Investment Products

It pays to remember that legitimate investment products, excluding stocks sold on national exchanges must be registered with state officials before they can be offered for sale to the public. Con artist bypass this requirement because they know that stringent state registration requirements protect investors from their offerings of promissory notes, high-yield investments, oil & gas. Call our office to see if the investment being sold to you is registered.

• Affinity Fraud

It is human nature to trust people who are like yourself. Con Artists are increasingly targeting religious, ethnic, cultural and professional groups to gain their trust and then steal their life savings.

• Variable Annuity Sales Practices

Regulators are concerned that investors are not being told about high surrender charges, other fees & costs associated with this product, penalties for withdrawals and steep sales commissions that agents often earn when they move investors into variable annuities. Some investors also are misled with claims of guaranteed returns when variable annuities actually are vulnerable to the volatility of the stock market. Variable Annuities are unsuitable for many retirees since it is for long term of 10 or more years.

CON ARTISTS “TARGET” SENIORS – Why? Because they are:

• Planning for Retirement

Seniors are looking for someone to help them with a plan.

• Looking for a Good Deal

Seniors are always looking for a deal.

• Getting A Windfall

Most seniors get a lump sum when they retire and are looking to put it somewhere.

• Catching: Concerned About Haven’t Saved Enough

I should of saved more? What can I do to make that money up?

• Stretching: Concerned Money Won’t Last and Financially Stressed

Do I have enough money if I live longer? Do I have enough money to survive if my spouse dies?

• Trusting and Fail to Verify

Most seniors trust that the salesperson is telling the truth and verifying the information is not necessary.

• Inexperience and Unaware

Others managed my investment and so I’m not sure what to do.

CON ARTISTS USE “STATEMENTS”

• I Just Got A Hot Tip / This Is A Sure Thing

Con artists try to entice you with one liners. Often times, if you ask them to disclose or validate their statement, they can’t or won’t want to.

• No Other Investment Will Give You Similar Returns

No one investment is so unique that it is the only one of its kind.

• Guaranteed, Or Your Money Back

Nothing is guaranteed! Note, the higher the risks the more chance of gains/losses, the lower the risk the less chances of gains/losses.

• Everyone Who Invested Got Rich

Enticement. Con artists will try to use this statement to validate their scam or scheme.

• You Have to Invest Today / It Can’t Wait Until Tomorrow

High pressure sales. Con artists don’t like to give you time to validate or research their investment or to talk to other people.

CON ARTISTS LIKE TO

• Use High Pressure Sales Tactics / Try to Make Things Happen... Today

Again, con artists don’t like to give you time to validate their products, talk to other people or research who they are.

• Likes To Deal In Cash

It makes it harder for authorities to trace them.

• Try And Obtain Financial Account Info

Con Artists will make it seem like they are doing you a favor by handling your transactions or even make it seem like it is the only way they can do a transaction. Never give out your financial information, pin numbers or social security numbers.

CON ARTISTS PUSH POORLY UNDERSTOOD FINANCIAL PRODUCTS

• They Don’t Want You To Know What You Are Buying

That’s because if you knew what you were buying, you probably wouldn’t buy it.

• Too Complicated To Explain

Con Artists like to tell you this. Nothing should be too complicated to explain. If you don’t know what you are investing in, you shouldn’t be investing in it.

• Trust Me

Common phrase used by con artists. They will tell you that you don’t have to read it...just trust me.

• Simply Stated / Explained In General

Don’t be afraid to ask questions. Even if something is explained to you in general, take the time to read it for yourself.

• Unsuitable

Just not for you given your age, cost/fees, medical situation, investment goals and lifestyle.

CON ARTISTS BRING OUT THE WORST IN YOU

• Greed / Who Wants To Be A Millionaire?

Con Artists know how you think and how you would respond. They know that it is very easy to get hooked on greed.

• Fear / What If You Get Sick?

Con Artists will tell you stories of people who got sick and they or their spouses suffered financially.

• Insecure / You Won’t Have Enough Money!

They will play with your emotions.

CON ARTISTS DON’T LIKE TO BE FOUND

• You Can’t Call Them Or Visit Their Office

It’s because they don’t have one. Con Artists don’t like to be traced. A simple way to test them is to ask to meet at their office or you’ll call them to make an appointment. It is very unusual for a reputable business/person not to have a place of business or business telephone.

CON ARTISTS DRESS FOR SUCCESS

• Use Their Appearance

Con Artists like to impress you with how they look. They know that people think that if people have nice/expensive clothing, shoes, cars, etc. People think they must be successful. That’s not always true.

• Talk About How Wealthy They Are

Con Artists talk about how they bought three houses last month, own two exotic cars, took trips to Europe... all to impress you and make you think that their investment will provide you with similar wealth.

CON ARTISTS ARE FAIR WEATHER FRIENDS

• Once You Invest, They Are No Longer Friendly Or Come Around

Always follow up with your investments. Especially if it’s your first time investing with a person, follow up the next day or so.

WHERE TO WATCH FOR CON ARTISTS

• Free Meal “Seminars”

• Country Club

• Church

• Telephone Hot Tip

• Phony Fax Tip Not Supposed to Get

• Fancy Offices

• Living Room

• Direct Mail

• Internet

They can be found just about any where. Look good, listen good and use our tips to detect the deceptive behavior of a Con Artist.

HOW TO PROTECT YOURSELF

• Do Your Homework

An opportunity missed is better than losing your life savings.

• Check With State Regulators - DCCA, Securities Branch

You should always call and ask questions or check out our website at dcca.

• Explain what we do in SEC, SEB and IEP.

Securities Compliance Branch (SEC) registers broker-dealers and their salespersons and investment advisers and their representatives. Once registered, this branch also licenses them. Also, check out the Financial Industry Regulatory Authority (FINRA) website at to verify if your broker-dealers and/or advisers are registered and licensed.

Securities Enforcement Branch (SEB) takes in complaints at 58SCAMS (587-2267) and investigates potential violations of Hawaii securities laws. Also prosecutes violation of securities laws & rules. When you call to leave a complaint be sure to leave your contact information so we can follow up with you. It’s CONFIDENTIAL and we can help.

Investor Education Program (IEP) helps with how to make wise choices when investing, improve financial literacy, and gives presentations.

• Check With Better Business Bureau

A good resource for complaints.

• Ask For Things In Writing

If they can’t put it in writing, then it is probably untrue.

• Understand What You Are Investing In

Never give money to someone unless you know what they are going to do with it.

• Don’t Be A “Courtesy Victim”

Older generations are thought to have courtesy, be respectful and trusting. You can’t be like that with today. Con artists know this and will use this to there advantage.

• Always Stay In Charge Of Your Money

Stay involved, ask question, know what you are getting yourself into, etc. Remember, its your money!

• Never Judge A Person’s Integrity By How They Look & Sound

Don’t be fooled. Con artists come in every shape and size.

• Monitor Your Investments

Review your monthly or quarterly statements. Look for discrepancies or big increase/losses. Don’t be afraid to ask the company to explain themselves.

• Call 58SCAMS To Report Investment Fraud

Often times, victims are reluctant to report fraud. This makes it difficult to prosecute fraud.

REMEMBER

Read slide out loud.

After reading “Your Greatest Protector Against Investment Fraud...”

[ Wait for audience to answer... then click for answer ]

[ Go to next slide ] - Display Contact Information

IN CLOSING

Question & Answers

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