Ohio Division of SecuritiesOhio Division of Securities

Your Name Here Your Name Here

Investment Fraud and Investor ProtectionInvestment Fraud and Investor Protection

INVESTMENT SCAMSINVESTMENT SCAMS

Over $10 Billion a yearOver $10 Billion a year

$1 million every hour$1 million every hour

All educational and income All educational and income levelslevels

Division of SecuritiesDivision of Securities

Licensing SectionLicensing Section

Registration SectionRegistration Section

Enforcement SectionEnforcement Section

Don’t become a VictimDon’t become a Victim..

Who Needs to be Licensed?Who Needs to be Licensed?

SalespersonsSalespersons

Brokerage FirmsBrokerage Firms

Investment AdvisersInvestment Advisers

Investment Adviser RepresentativesInvestment Adviser Representatives

Central Registration Depository Central Registration Depository (CRD)(CRD)

Salesperson’s Employment HistorySalesperson’s Employment History Customer ComplaintsCustomer Complaints Pending ArbitrationPending Arbitration Criminal HistoryCriminal History Actions by other Regulatory AgenciesActions by other Regulatory Agencies

Investment Advisers stand in a fiduciary

capacity with their clients.

Securities Salespeople are Securities Salespeople are Prohibited from:Prohibited from:

Making False Representations of Making False Representations of Material Fact (i.e.Lying)Material Fact (i.e.Lying)

Omitting to Disclose Material Omitting to Disclose Material Information (i.e. not telling you Information (i.e. not telling you important things)important things)

Selling Unregistered SecuritiesSelling Unregistered Securities

Securities Salespeople are Securities Salespeople are Prohibited from:Prohibited from:

Recommending Unsuitable SecuritiesRecommending Unsuitable Securities Executing Unauthorized TransactionsExecuting Unauthorized Transactions Excessive Trading in Your Account Excessive Trading in Your Account

(Churning)(Churning) Charging a Price not reasonably related to Charging a Price not reasonably related to

the Market Pricethe Market Price Receiving Excessive CommissionsReceiving Excessive Commissions Guaranteeing against LossesGuaranteeing against Losses

Securities Investor Protection Securities Investor Protection Corporation (SIPC)Corporation (SIPC)

Coverage provides losses suffered by Coverage provides losses suffered by investors in the event of financial investors in the event of financial difficulties of a brokerage firm.difficulties of a brokerage firm.

Provides coverage up to $500,000.Provides coverage up to $500,000.

Registration of SecuritiesRegistration of Securities

All Securities sold in All Securities sold in the State of Ohio the State of Ohio must be Registered must be Registered or properly Exempt or properly Exempt from Registration.from Registration.

Registration ProcessRegistration Process

Review Terms and Conditions of Review Terms and Conditions of Offering.Offering.

Review Literature in Connection with Review Literature in Connection with Offering. (prospectus)Offering. (prospectus)

Not an endorsement, but a statement that Not an endorsement, but a statement that offering has met the minimum requirements offering has met the minimum requirements of the Ohio Revised Code.of the Ohio Revised Code.

Enforcement SectionEnforcement Section

Investigates alleged Investigates alleged violations of the Ohio violations of the Ohio Securities Act and Securities Act and takes action when takes action when necessary.necessary.

INVESTMENTSINVESTMENTS

Characteristics of a ScamCharacteristics of a Scam

Guaranteed ReturnsGuaranteed Returns Promise of Quick Promise of Quick

ProfitsProfits Inside InformationInside Information Refusal to send Refusal to send

Written InformationWritten Information Calls coming from Calls coming from

distant cities/statesdistant cities/states

Reluctant to provide Reluctant to provide Information about Information about sales person or firmsales person or firm

Unusual Unusual arrangements for arrangements for payment.payment.

Poorly presented Poorly presented Financial ProductsFinancial Products

Types of Investment FraudTypes of Investment Fraud

PONZI SchemesPONZI Schemes

Promissory NotesPromissory Notes

Viatical SettlementsViatical Settlements

Franchise/Business Franchise/Business OpportunitiesOpportunities

International International InvestingInvesting

Boiler roomsBoiler rooms

Boiler RoomBoiler Room

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Boiler RoomsBoiler Rooms Call people in other statesCall people in other states

Mooch listsMooch lists

Answer for every objectionAnswer for every objection

Little or no riskLittle or no risk

High rate of return & secret tipsHigh rate of return & secret tips

Boiler RoomsBoiler Rooms Demand immediate actionDemand immediate action

Won’t disclose street Won’t disclose street addressaddress

Avoid U.S. mailsAvoid U.S. mails

Stall with excusesStall with excuses

Disappear when heat’s onDisappear when heat’s on

Pyramid SchemesPyramid Schemes

Pyramid Pyramid SchemeScheme

Profit or cut for Profit or cut for recruitingrecruiting

No product or No product or way too high way too high priced productpriced product

Unrealistic Unrealistic claimsclaims

Network Network MarketingMarketing

Commission on Commission on sale of productsale of product

Not paid for Not paid for recruitsrecruits

Tangible product Tangible product or serviceor service

Fair market priceFair market price

Ponzi SchemesPonzi Schemes Type of pyramid Type of pyramid

schemescheme

Use later investors’ $ to Use later investors’ $ to pay off early investors - pay off early investors - “songbirds”“songbirds”

Promise very large Promise very large returns in short timereturns in short time

Ponzi SchemesPonzi Schemes

““Can’t lose” way of making Can’t lose” way of making moneymoney

Collapses when # Collapses when # investors waiting for $> # investors waiting for $> # of new investors of new investors

““House of cards” collapsesHouse of cards” collapses

Fraudulent Sales TechniquesFraudulent Sales Techniques

High pressure sales tacticsHigh pressure sales tactics

““Decide now before the opportunity is Decide now before the opportunity is gone” gone”

Promises that sound too good to be truePromises that sound too good to be true

““The investment is risk-free”The investment is risk-free”

Fraudulent Sales TechniquesFraudulent Sales Techniques ““There is no time to provide written There is no time to provide written

information and references”information and references”

““We need your credit card or checking We need your credit card or checking account number” account number”

““We will pick up the money at your We will pick up the money at your home”home”

““You have won a free gift or trip” You have won a free gift or trip”

The best part of my job.The best part of my job.

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Investor Bill of RightsInvestor Bill of Rights

Right to Information on Right to Information on firm/salespersonfirm/salesperson

Right to Information on Right to Information on Risks/ObligationsRisks/Obligations

Right to good adviceRight to good advice Right to all paperworkRight to all paperwork Right to accurate Right to accurate

account statementsaccount statements

Investor Bill of RightsInvestor Bill of Rights Right to have terms Right to have terms

explainedexplained Right to your moneyRight to your money Right to prompt serviceRight to prompt service Right to know what you Right to know what you

are being charged and are being charged and whywhy

Right to State records Right to State records concerning your concerning your broker/salespersonbroker/salesperson

Warning SignsWarning Signs

High Pressure Sales Tactics - Must Act Now !High Pressure Sales Tactics - Must Act Now !

Promises of High Guaranteed ReturnsPromises of High Guaranteed Returns

Refusal to send you Written Information Refusal to send you Written Information Before you InvestBefore you Invest

If it sounds to good to be true..If it sounds to good to be true..

It Probably Is !!It Probably Is !!

Say No to offers you Say No to offers you are unsure about are unsure about

The fact of the matter is...The fact of the matter is...

Ohio Division of SecuritiesOhio Division of Securities

Hotline:

1-800-788-1194