Administrative Orders Issued
Weekly Securities Filings
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.
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.