A NEWSLETTER OF THE ILLINOIS SECURITIES DEPARTMENT ...

[Pages:4]A NEWSLETTER OF THE ILLINOIS SECURITIES DEPARTMENT ? SECRETARY OF STATE JESSE WHITE

SECURITIES SUMMER2008 bulletin

The fall 2007 Securities Bulletin warned about the dangers of "Free Lunch" seminars directed at seniors and to be cautious of anyone using the title "senior specialist." A senior designation confers an impression that a salesperson has special qualifications or specialized education in addressing the needs of seniors or retirees, particularly in the areas of financial planning, estate planning or investing. However, requirements for these designations vary widely, as does the process for monitoring compliance with the code of ethics, if any, of the various organizations that confer such designations.

The North American Securities Administrators Association recently issued a new model rule that addresses the inappropriate use of senior certifications and professional designations. NASAA's model rule prohibits the misleading use of senior and retiree designations while providing a means for securities regulators to recognize certain designations conferred by accredited organizations.

My office will implement the model rule this summer to fit current Illinois Securities Department rules and regulations. The proposed rule will be posted at . Please take a moment to familiarize yourself with the proposed rule and send any comments to the Securities Department.

Jesse White Secretary of State

IN THIS ISSUE

? IL JOINS INVESTIGATION OF AUCTION-RATE SECURITIES ? ? CASE RESULTS IN 330-YEAR PRISON SENTENCE ? ? INVESTMENT ADVISER RECORDS REQUIREMENTS ? ? ADMINISTRATIVE ENFORCEMENT ORDERS ?

? BROKER-DEALER BRANCH OFFICES ? WEB SITE UPDATES ?

Illinois joins investigation of auction-rate securities

Secretary of State Jesse White announced that Illinois is joining eight other states in conducting investigations involving the sale of auctionrate securities. The nine-state task force is coordinating efforts to help investors who cannot access funds that their brokers placed in these complex investment products.

Illinois securities regulators have been investigating auction-rate securities complaints since late February. Investigations center on sales practices and supervisory issues related to auction-rate securities, often promoted as being similar to cash deposits or money market accounts. However, because of the tight credit market stemming from the subprime mortgage crisis, many auctions where the securities are traded have failed. As a result, many investors are finding they are unable to access their money. The focus of the investigations is to determine what conduct took place at the point of sale -- what was potentially misrepresented and omitted -- with the goal of securing for investors access to their cash as requested.

"These investors' lives have been detrimentally affected because the money they thought was liquid is now tied up in this frozen market," said Secretary of State Jesse White. "Based on investor complaints, it appears to be a pervasive problem."

Complaints have a common theme. Investors say they did not know their money was being held in auction-rate securities and were not advised of the liquidity risks. The complaints have come from a wide range of investors, including young families saving for a home, small business owners and retirees.

Investor Education summer outreach

The Securities Department's Investor Education Division is out and about this summer. Division staff will be on hand at the following events to talk with visitors and distribute investor education materials. If you have a group or organization looking for speakers, or a conference or festival, please contact the Securities Department at 800-628-7937.

? Taste of Chicago -- June 27-July 6 ? Illinois State Fair in Springfield -- August 8-17 ? DuQuoin State Fair -- August 23-September 1 ? Pekin Marigold Festival -- September 6-7

Administrative Enforcement Orders

Enforcement Orders also are available at (click Departments, Securities, Administrative Actions).

Order of Cancellation CMG Institutional Trading LLC CRD# 47264 542 S. Dearborn St. Ste. 450 Chicago, IL 60605

Summary Order to Cease and Desist USA Card Services 4455 LBJ Freeway, Ste. 501 Dallas, TX 75244

Independent Wealth Solutions, LLC 405 W. Southern Ave., Ste. 3 Tempe, AZ 85282

Don Lapre 3112 N. 30th Ave. Phoenix, AZ 85017 P.O. Box 4802, E. Ray Rd. #23-Box 45 Phoenix, AZ 85044

The Greatest Vitamin in the World 3112 N. 30th Ave. Phoenix, AZ 85017 P.O. Box, 4802, E. Ray Rd. #23-Box 45 Phoenix, AZ 85044

Horizon Technologies, LLC 2741 W. Southern Ave., Ste. 6 Tempe, AZ 85282

Summary Order of Denial Gregory A. Eastman CRD# 2456282 598 E. Krista Way Tempe, AZ 85284

Order of Dismissal Ameriprise Financial Services, Inc. 55221 Ameriprise Financial Center Minneapolis, MN 55474

Hopkins Financial Services, Inc. 1112 S. Washington St., Ste. 119 Naperville, IL 60540

Consent Order of Dismissal Louis E. Stough CRD#1675992 100 Barclay Blvd. #224 Lincolnshire, IL 60069 c/o Reliance Worldwide Investments, LLC 2033 N. Milwaukee Ave., #125 Riverwoods, IL 60015-3581

Anthony T. Coniglio CRD# 2434759 9 Carrie Dr. Manalapan, NJ 07726

Consent Order of Fine Savant Capital Management, Inc. IARD# 107271 190 Buckley Dr. Rockford, IL 61107

Order of Prohibition Olsen Acquisitions 500 N. Michigan Ave. Chicago, IL 60611

Leslie T. Adams 4300 Augusta Blvd. Chicago, IL 60651

Global Transitional Services 4300 Augusta Blvd. Chicago, IL 60651

USA Properties of Illinois, Inc. Zia Ahmed P.O. Box 957 Wheaton, IL 60189-0957

Richard M. La Croix 2101 S. Meacham Palatine, IL 60067-7459

Carlton Financial Services 8400 Woodbine Ave. Markham, ON L3R, Canada

Global Touch Systems, Inc. John J. Kaufman 202 Prospect Rd., Ste. 202 Bloomington, IL 61704

Michael J. Riley 3-A General Sheridan Ct. Apple River, IL 61001

The Mortgage Specialists 1550 Spring Rd., #310 Oak Brook, IL 60523

Roscara Capital, Inc. 1550 Spring Rd. Oak Brook, IL 60523

Trust One Mortgage 430 W. Erie St., Ste. 205 Chicago, IL 60610

Consent Order of Prohibition Albert Jack Lukasik Fka Albert Jack Lucente 8540 S. Harlem Bridgeview, IL 60455

Consent Order of Revocation David T. Owen III CRD# 1105997 624 Menlo Park Hartville, OH 44632

One Financial Securities, Ltd. CRD# 104282 301 Magazine St., 3rd Floor New Orleans, LA 70130

Order of Revocation Chanse K. Menendez, Sr. CRD# 2448467 25 Michele Ln. Hauppauge, NY 11788 Fordham Financial Management, Inc. 14 Wall St., 18th Floor New York, NY 10005

Consent Order of Suspension Phillip M. Graff CRD# 2094581 498 Franklin Ln. Elk Grove Village, IL 60007

Consent Order of Withdrawal of Application Paul J. Pallo CRD# 1068684 349 Forest Rd. Mahwah, NJ 07430

Lawrence T. Smith CRD# 2419838 15 Post Dr. Roslyn, NY 11576

Consent Order of Withdrawal Michael W. Brinton CRD# 1565431 1915 Brentwood Ter. Nashville, TN 37211

David G. Rincon CRD# 4598476 35-1910 Hudson St. Jersey City, NJ 07302

Securities Alert: Chicago man and real estate company

ordered to stop selling securities advertised on Spanish radio

Secretary of State Jesse White ordered Raul Marrero, Reeden Capital Group, Inc., and Multi Family Three, LLC, to stop selling securities after receiving complaints from investors. The respondents are not licensed to sell securities in Illinois.

The Securities Department issued the temporary order of prohibition after learning Marrero was issuing promissory notes to investors with claims of investing the funds in real estate ventures and paying investors high interest rates. Investors failed to receive the promised returns and contacted the Securities Department.

Marrero, who has since left the company, and the Reeden Group had advertised their services on a number of Spanish radio stations. People who invested with Marrero, Reeden or Multi Family are urged to call the Securities Department at 312793-3178. A Spanish-speaking investigator is available to assist investors who do not speak English.

Web site updates

The Securities Department has updated information on the Secretary of State's Web site at (click Departments, then Securities). The updates provide consumers additional tools for conducting research and assist securities dealers in accessing information more effectively.

REGISTRATION STATUS -- Consumers

may now search the records of the Securities Department to determine the registration status of business brokers and their representatives, loan brokers and business opportunity offerings. A record of a currently registered entity will yield the following information: entity name, mailing address, business telephone number, contact person and, in the case of a business broker, the names of all registered representatives who conduct business on behalf of the firm in Illinois. Click "Search for" on the Securities Department site to use this new tool. Information on the statutes and filing requirements for these registration filings also may be obtained at the site.

FILING FEES -- The Securities site also

now offers easier access to the complete listing of fees for all required filings made to the department, as well as more prominent access to examination requirements for broker-dealers and investment advisers. Click "Examination Requirements & Common Fees" to access this information.

Securities investigators assist in case resulting in 330-year prison sentence

Norman Schmidt, 72, of Denver, Colorado, was recently sentenced to 330 years in federal prison. He was further ordered to forfeit $38 million in assets and started his sentence immediately.

Securities Department enforcement personnel testified for the prosecution in the trail in Denver. The department had issued an Order of Prohibition against Schmidt and his company, Reserve Foundation Trust, in April 2000. Also named in that order was an Illinois man, George Alan Weed, who responded to the department with information used by the U.S. Attorney in Denver to prosecute Schmidt.

In operation from 1999 to 2003, the investment scheme claimed to be "high-yield" and "low-risk," with the proceeds to be used to purchase the historic Redstone Castle in Colorado. During the course of the investigation, federal agents seized 60 bank accounts, eight NASCAR race cars, one race truck and other race-related assets totaling about $24 million. The scam defrauded more than 1,000 victims.

In a separate case, a Staunton man was convicted and sentenced to five years in prison in May for a con he ran in Iowa. Gary Lilley ran newspaper ads seeking investors in an oil additive, the rights of which he did not own. An Iowa couple lost $50,000 in the scheme. The Securities Department investigated the case along with the U.S. Postal Service.

Investment adviser records requirements

State-registered investment advisers are required to maintain a number of records for the protection of their clients and to ensure compliance with provisions of the Illinois Securities Law. Generally speaking, investment advisers are required to maintain records for at least three years.

The Securities Department recently published a Guide for New Investment Advisers with information on registration renewal, required documentation, and other information about maintaining registration as an investment adviser and ensuring compliance with requirements of the law. To obtain a booklet or for details on the law regarding required documents, please visit (click Departments, then Securities).

Field auditors with the Securities Department's Audit Compliance Division conduct routine inspections of registered investment advisers. Audits may be scheduled in advance or conducted unannounced. Investment adviser firms can be of great assistance in an audit review by providing timely access to the documents requested and cooperating with the on-site auditors. The audit staff seeks to complete their audit reviews in as prompt and efficient a manner as possible.

Illinois Securities Department

800-628-7937 888-231-1175 (Spanish line)

Presorted Standard U.S. Postage

PAID Permit #93

Spfld, IL

Securities Publications

To request publications, please call 800-628-7937 or visit (click Publications, then Securities).

? Avoiding Business Opportunity Scams brochure ? Business Brokers brochure ? Checking Your Stockbroker or Brokerage Firm brochure ? FSI: Fraud Scene Investigator brochure (about the new

online game for students) ? Investment Guide for Illinois Consumers booklet ? Loan Brokers brochure ? Senior Citizens Securities Fraud brochure ? TAPS--Combat Military Financial Fraud brochure ? Tips for Online Investors brochure

Past issues of the Securities Bulletin as well as registration forms for securities dealers and representatives also are on the Web site.

Jesse White Secretary of State Illinois Securities Department Jefferson Terrace, Ste. 300A 300 W. Jefferson St. Springfield, IL 62702 800-628-7937

69 W. Washington, Ste. 1220 Chicago, IL 60602 312-793-3384

The Securities Bulletin is a publication of Jesse White, Secretary of State, Illinois Securities Department. Produced by the Secretary of State Communications Department. Printed by authority of the State of Illinois -- July 2008 -- 8.3M

Broker-dealer branch offices

Since July 2006, the Securities Department has utilized the uniform definition of "branch office" for all broker-dealers who operate branch offices in Illinois. The branch office definition was developed jointly by NASD, NYSE and state securities regulators.

Adoption of the new definition by the Illinois Securities Department coincided with its implementation by NASD nationwide. Since its adoption, all initial, amended and renewal filings for branch offices are now processed through the CRD system. The new rule eliminated all broker-dealer paper filings related to branch offices to the Securities Department.

A copy of the department's rule regarding broker-dealer definition may be viewed at mission/jcar/ admincode/014/014001300B02800R.html.

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