Press Releases

For Immediate Release
March 21, 2005  

Wisconsin Names Top 10 Threats to Investors

(Madison, WI) Patricia D. Struck, Administrator of the Wisconsin Department of Financial Institutions Division of Securities today identified the most common ploys being used to cheat Wisconsin investors out of hundreds of millions of dollars.

“Investors should keep their guard up anytime anyone offers an investment opportunity. It pays to remember that if an investment sounds too good to be true, it usually is,” said Struck.

The following ranking of the top 10 threats to Wisconsin investors for 2005 is based on the order of prevalence and seriousness as identified by an annual survey of members of the North American Securities Administrators Association (NASAA):

1. Ponzi Schemes: The premise is simple: pay early investors with money raised from later investors. The only people who make money are the promoters who set the Ponzi in motion.

2. Unlicensed Individuals Selling Securities: Anyone selling securities without a valid securities license should be a red alert for investors. Remember: No license, no sale. (FX Trade; Avalon)

3. Unregistered Investment Products: Con artists bypass stringent state registration requirements to pitch viatical settlements, pay telephone machine and ATM leasing contracts, and other investment contracts with the promise of “limited or no risk” and high returns.(Cash Link; Universal Luxury)

4. Promissory Notes: Empty promises can leave these notes worth less than the paper on which they are printed. (CK Records)

5. Senior Investment Fraud: Because of their access to a lifetime of savings, seniors continue to face investment fraud by con artists peddling unsecured promissory notes, viatical settlements and other investments that are either fraudulent or unsuitable for them based on their particular financial needs. (Emedia)

6. High-Yield Investment Schemes: Con artists lure investors with promises of triple-digit returns through access “risk-free guaranteed high-yield instruments” or something equally deceptive. (Investors Freedom; Meliorations Management)

7. Internet Fraud: Stock promoters are using online “boiler rooms,” instant messaging, and fake websites to lure investors into “pump-and-dump” stock schemes.

8. Affinity Fraud: Con artists are increasingly targeting religious, ethnic, cultural, and professional groups. (Manhattan Gold)

9. Variable Annuity Sales Practices: Senior investors should beware of the high surrender fees and steep sales commissions agents often earn when they move investors into variable annuities.

10. Oil and Gas Scams: With oil topping $50 a barrel and continued Middle East instability, regulators warn that con artists continue with schemes promising quick profits in oil and gas ventures. (Espey Development; Prairie Resources)

Three scams also were cited for “dishonorable mention,” including penny stocks, private placements, and investment seminars.

Before making any investment, Administrator Struck urged investors to ask the following questions: Are the seller and investment properly licensed and registered? Has the seller given you written information that fully explains the investment? Are claims made for the investment realistic? Does the investment meet your personal investment goals?

Administrator Struck also urged investors to contact their state securities regulator with any questions about an investment product, broker or adviser, before making an investment. “One phone call can save a lot of money and heartache,” she said. In Wisconsin, if people suspect a scam, they should call the Wisconsin Department of Financial Institutions, Division of Securities, at 1-800-472-4325. Wisconsin law requires that every security that is offered or sold in the state must either be registered with the Department of Financial Institutions or meet certain criteria to qualify for an exemption from registration.

For more information, visit the NASAA Fraud Center at NASAA is the oldest international organization devoted to investor protection. Its membership consists of the securities administrators in the 50 states, the District of Columbia, Puerto Rico, Canada, and Mexico.