Dept' of Financial Institutions

1
Introduction

• Dept. of Financial Institutions
• Scott Jarvis, Director
• Jeremy Lushene
• Communications
• Kristen Culbert
• Securities Division

2
Overview

• Who we are
• Top Ten List
• Tips on Avoiding Becoming a Victim
• What to Do When There is a Problem
• QA

3
Overview

• Who we are
• Top Ten List
• Tips on
• Avoiding Becoming a Victim
• What to Do When There is a Problem
• QA

4
Who We Are

• Division of Banks
• Regulate commercial banks, trust companies,
  savings banks, savings and loan associations
• Division of Consumer Services
• Licenses and regulates business activities of
  consumer loan companies, mortgage brokers, check
  cashers and payday lenders, and money service
  providers
• Division of Credit Unions
• Regulate state-chartered credit unions licensed
  to operate in Washington
• Securities Division

5
Securities Division

• What do we do?
• Regulate Securities Investments, Business
  Opportunities, Franchises, and Off-exchange
  Commodities
• Review Securities Offerings, Franchise Offerings,
  Business Opportunity Offerings
• Licensing and Examinations of Broker-Dealers,
  Investment Advisors, and Escrow Agents
• Enforcement Initiates investigations based upon
  complaints and takes appropriate civil
  enforcement actions refer matters for criminal
  prosecution
• Provide assistance to small businesses
• Investor education seminars

6
Top Ten Scams

• NASAA North American Securities Administrators
  Association
• www.nasaa.org
• The Securities Division

7
Top 10 Scams

• 1. Ponzi Schemes
• The premise is simple pay early investors with
  money raised from later investors.

8
Top 10 Scams

• 2. Unlicensed Individuals Selling Securities
• Anyone selling investments without a valid
  securities license should be a red flag for
  investors.

9
Check out your broker

• https//fortress.wa.gov/dfi/licenselu/dfi/licenseL
  U/default.aspx (Washington only)
• www.nasd.com/brokercheck for 10 years of history
  including criminal and felony charges and
  convictions, investment-related misdemeanor
  charges and convictions, disciplinary actions and
  investigations by regulators, investment-related
  civil actions, consumer-initiated complaints and
  arbitration proceedings.

10
Top 10 Scams

• 3. Unregistered Investment Products
• Sales of investment contracts that bypass
  stringent state registration requirements and
  promise high returns with little or no risk.
• Examples viatical settlements, pay telephones,
  and ATM leasing.

11
Check out your investment

• http//www.sec.gov/edgar/searchedgar/webusers.htm
  for information about whether a companys
  security is registered or exempt from
  registration. You will need the name of the
  company that is offering the security.

12
Top 10 Scams

• 4. Promissory Notes
• Misconception that a promissory note is not a
  security not true if the funds are used for a
  business venture or other investment purpose.
• Often times used by the fraudster in an attempt
  to circumvent securities regulations.

13
Top 10 Scams

• 5. Senior Investment Fraud
• Because they have built a lifetime of savings,
  seniors continue to face investment fraud by con
  artists
• Free Lunch/Dinner seminars

14
Top 10 Scams

• 6. High-Yield Investment Schemes
• Con artists lure investors with promises of
  triple-digit returns through access to risk free
  guaranteed high yield instruments or something
  equally deceptive.
• Risk ALWAYS equals Return.
• Much like Ponzi Scheme.
• Examples Prime Bank Instruments, Offshore
  Trading Programs, Medium Term Notes.

15
Top 10 Scams

• 7. Internet Fraud
• Stock promoters use online boiler rooms,
  instant messaging, and fake websites to lure
  investors into pump-and-dump stock schemes.

16
Top 10 Scams

• 8. Affinity Fraud
• Con artists are increasingly targeting religious,
  ethnic, cultural and professional groups.
• People wont complain, level of trust already
  established.
• http//www.komotv.com/buyerbeware

17
Top 10 Scams

• 9. Variable Annuity Sales Practices
• Are being sold to seniors as an alternative to a
  certificate of deposit (CD).
• May have higher interest rate than a CD but may
  have high surrender fees and steep sales
  commissions.

18
The dangers of variable annuities

• Long term investment (might not be suitable for
  seniors). Funds are locked up for a period of
  time.
• Not typically suitable for investors that may
  need access to the funds to cover expenses.
• Not typically suitable for investors to have
  entire investment portfolio in a variable
  annuity.

19
Top 10 Scams

• 10. Oil and Gas Scams
• With oil prices at record levels and continued
  Middle East instability, con artists may renew
  schemes promising quick profits in oil and gas
  ventures.
• Usually telephone solicitation.

20
Avoid Being Victimized

• 1. Research before you invest. Call your state
  securities agency to learn more about a
  securities salesperson and their firm. Ask
• if they are registered to do business in the
  state,
• the disciplinary record of the firm and its
  representative,
• if any complaints have been received, and
• if they under active investigation.

21
Avoid Being Victimized

• 2. Ask questions about the investments, such as
• where the company is traded,
• is it listed in the stock tables printed in your
  local newspaper, and
• who is making a market in the stock.

22
Avoid Being Victimized

• 3. Have a NO response ready.
• A response that gives you an out from the
  conversation.
• Example I need to talk to my accountant before I
  make any investment.

23
Avoid Being Victimized

• 4. Send copies of your complaints to regulators.
• DFI 1-877-RING-DFI.
• FINRA (240) 386-HELP.
• For a phone number or address of another state
  regulator, call the North American Securities
  Administrators Association at [phone].

24
Conclusion

• Questions?
• Thank You!