Leigh Davis-Schmidt Securities Examiner

2. Leigh Davis-Schmidt Securities Examiner

3. Utah Division of Securities Mission: The Securities Division enhances Utah’s business climate by protecting Utah’s investors through education, enforcement and fair regulation of Utah’s investment industry while fostering opportunities for capital formation.

4. Register Securities License Investment Professionals Conduct Compliance Examinations Educate Investors Investigate Investor Complaints Enforce State Securities Laws Administrative & Civil Actions Criminal Filings How Do We Accomplish This?

5. Top 10 Ways to Lose Your Money

6. Ponzi Schemes Unlicensed Individuals Selling Securities Unregistered Investment Products Promissory Notes Senior Investment Fraud High-Yield Investment Schemes Internet Fraud Affinity Fraud Variable Annuity Sales Practices Unscrupulous Brokers

7. ANYONE AT ANY AGE CAN BE SCAMMED – EVERYONE IS A TARGET! Why Is This Important To You?

8. Promise High Rates of Return, Little or No Risk Use Money From New Investors to Pay Earlier Investors Typically No Legitimate Business Revenue Examples: 12 Daily Pro, Real Estate Dev. Ponzi Schemes

9. Lured by High Commissions Anyone Selling Securities Must Be Licensed - No License, No Sale Unlicensed Individuals

10. Bypass Stringent State Registration & Disclosure Requirements Securities – Not Just Stocks & Bonds Promise High Returns, Little or No Risk Example: American-Dairy.com (Paul Schwenke) Unregistered Investment Products

11. Investor’sName

12. Typically Issued by Little Known or Non-Existent Companies Promise High Returns, Little or No Risk Insurance Agents Often Targeted to Promote These Notes Examples: The Millionaire Investors Group, Autorama, Winning in the Cash Flow Business Promissory Notes

13. 10% Per Annum ForeignCurrency Investor’s Name

14. 15% of The U.S. Population, 30% of Fraud Victims Why? Baby Boomers Have Over $8.5 Trillion in Investable Assets 10,000 Seniors Will Turn 60 Every Day Over The Next 20 Years Senior Investment Fraud

15. Promise Double or Triple-Digit Returns Through Access to “Risk Free Guaranteed High-Yield Instruments” Prime Bank Schemes Access to Investment Portfolios of the World’s Elite Banks “Secret Off-Shore Trading Programs” Example: Mowen (Isagenix) High-Yield Investment Schemes

16. Not A Solicitation IMF Sponsored High Yield Investment Program $600 Billion In 10 Days

17. 665% In 12 Months Secret Currency Beyond Reach of Government Used By World’s Wealthy

18. E-mail, Web Sites, Instant Messaging, Chat Rooms (Hidden Identities) $122 Million in Losses in 2002 More Than 125,000 Victims and Over $100 Million in Losses in 2003 Very Little Money is Ever Recovered Internet Fraud

19. “I am also a member of (insert your religious, ethnic, professional or community-based organization)” Same “deal” was made with a prominent leader of your organization – “name dropping” Example: TooeleCommunity Affinity Fraud

20. High Surrender Charges Higher Costs than Alternative Investments Benefits Cost Extra Steep Sales Commission Paid to Agents Long-Term Investment (10 Years or More) May Be Unsuitable for Many Retirees Variable Annuity Sales Practices

21. Annuity University • Use Introductory Seminars • Offer Free Meal • “Probe, Then Disturb, Then Enhance The Problem” Wall Street Journal July 2, 2002

22. Annuity University • “You’re there to solve their problems, but you have to create those problems first – No Problem, No Sale” • “Tell them you can protect their life savings from nursing-home and Medicare seizure of assets. They don’t know what that is, but it sounds scary…it’s about putting a pitchfork in their chest.” • “Show them their finances are all screwed up so that they think Oh, no! I’ve done it all wrong – this will make you money” Wall Street Journal July 2, 2002

24. Unsuitable Investment Recommendations Excessive Trading in Client Accounts Unauthorized Trading Guaranteeing Clients Against Loss Borrowing Money From Clients Example: Christofferson Unscrupulous Brokers

25. Promise of High Returns Promise of Little or No Risk Prey on Investors’ Trust Investors Don’t Ask Questions Common Threads

26. Boiler Rooms Reload Scams Other Threats to Investors

27. Locked Doors To Keep Customers & Regulators Out 157,000 Telephone Calls 50 Cold Callers Stratton Oakmont - 13,000 Calls Per Month To Utah Citizens Scam People Located Out Of State More Difficult For Investors To Complain More Difficult For Out-of-State Regulators To Conduct Examinations Typical Boiler Room

28. “I would never call anybody who lived in Jersey or New York. Never. My best states were Utah, Texas, Arizona, Virginia. Michigan was one of my favorite states too. Michigan was good. Stupid people up in Michigan. California too. Not Los Angles but on the outskirts of California. Sacramento. Utah was my favorite state. I think that was my top state. Because they were completely f***ing retarded. They have like nine wives, they’re Mormons. They’re retards. You call them from New York, and they’re like, ‘Where are you?’ And I’d say, ‘I’m a spit throw away from the New York Stock Exchange.’ And they’d say, ‘Really! How is it up there in New York?” “They’re fascinated by the whole concept of it. Utah, Arizona, Texas...” [p. 93] Born To Steal By Gary Weiss

29. Once A Victim, Twice A Victim… “I promise, you’ll make your money back if only you’ll invest in…” Promoter's Will Not Only Sell A Scam To The Same Person Twice, They Share Their List of “Suckers” With Other Promoters What Is A Reload Scam?

30. So, What Can You Do?

31. Ask Questions – Be An Informed Investor Check Out Strangers Touting Strange Deals Watch Out For Salespeople Who Prey On Your Fears Try To Rush Your Decision Don’t Be Afraid To Hang Up The Phone Don’t Put All Of Your Eggs In One Basket Monitor Your Investments - Always Stay In Charge Of Your Money

32. Get Everything In Writing And Keep A Copy Of All Documents Risk No More Than You Can Afford To Lose If You Don’t Understand The Investment - Avoid It!!! Report Misconduct, Fraud Or Abuse To The Division Pass This Information On To Your Family, Your Friends, And Others

33. REMEMBER: Investigate EVERYTHING Before You Invest

34. Utah Division of Securities1-800-721-SAFE (7233)(801) 530-6600www.securities.utah.gov