How You Can Avoid Scams, Frauds, and Inappropriate Investments

1. State of Oregon Division of Finance and Corporate Securities How You Can Avoid Scams, Frauds, and Inappropriate Investments

2. State of Oregon Division of Financeand Corporate Securities Eric Kleinman Investor Information Coordinator (503) 947-7492 dcbs.dfcsmail@state.or.us

3. What We Will Cover Today • The Division and the Program • Types of Fraud and Targets • What To Do Before You Invest • What To Do After You Invest • The Resources You Can Use

4. State of Oregon Division of Finance and Corporate Securities The mission of the Division of Finance and Corporate Securities (DFCS): “To encourage the widest possible range of financial services, products, and information for Oregonians, delivered in a safe, sound, and fraud-free manner.”

5. The Division The Division of Finance and Corporate Securities: Registers securities offerings Licenses brokerage and investment advisory firms and their salespeople Investigates violations of securities laws Runs the Investor Information Program

6. The Program The Investor Information Program: Was established in 1998 Informs Oregonians about securities laws and alerts them to fraudulent schemes Is funded from fines and settlements Works with other state, local, and federal agencies to prevent fraud

7. Types of Frauds and Targets Definition of economic crime: Crimes committed for financial gain that depend upon deception and fraud rather than violence or physical force.

8. Types of Frauds and Targets Cost of investment fraud: Americans are defrauded out of $300 billion every year by various scams Americans lose $40 billion every year just to fraudulent investment schemes.

9. Types of Frauds and Targets Warning signs that an investment may be a scam: High pressure sales techniques Promise of guaranteed high returns Promise of a “no-risk” investment Highly secretive insider tips The call is from another state or the investment is off-shore

10. Types of Frauds and Targets Warning signs that an investment may be a scam: No written information Request for your account number(s) Unusual offers to facilitate payment Offer of a free gift or trip

11. Types of Frauds and Targets The 2006 “Dirty Dozen” Potential Scams: 1. Senior Investment Fraud 2. Variable Annuities 3. Affinity Fraud 4. Internet Fraud/Phishing Scams 5. Ponzi/Pyramid Schemes 6. Fraudulent Charity Solicitations 7. Viatical Settlements 8. Military Fraud 9. Online Job Boards/At-Home Business Opportunities 10. Grant/Lottery/Jury Duty Scams (Pretexting) 11. Foreign Currency Exchange (ForEx)/Prime Bank 12. TTY/Relay Operator Phone Fraud

12. Types of Frauds and Targets Potential problems with legitimate investments: Misleading titles of sales persons Uninsured investments sold in banks Confusing account statements Proprietary or favored funds Unsuitable for your objectives

13. Types of Frauds and Targets How Do Con Artists Con Us? Appeal to some people’s greed Exploit some people’s fear Intangible products Complex products Con artists do not look like criminals

14. Types of Frauds and Targets Who can be the targets or victims? “Perception vs. Reality” Anyone with a phone, computer or mail box. People living alone. People who say, “I do not invest” or “I don’t have any money.” People who are looking to “get rich quick.”

15. Before the Investment Asking Questions That Keep You In Control: What is your name, your firm’s name and your telephone number? How did you get my name and number? Where is your office located? Are you and your firm licensed to sell this security?

16. Before the Investment More Questions To Keep You In Control: Is the investment registered? Can you send me a prospectus? What are the fees? What are the risks? If I sold this today, how much would I get? Can you provide references?

17. Before the Investment Even More Questions To Keep You In Control: How are you compensated for this sale? How long have you sold this product, and do you have any specialized designations? How does this opportunity match my investment objectives? Can you explain the investment opportunity independently to a friend or relative?

18. Before the Investment General Financial Self-Defense Tips: It’s OK to be rude! You can hang up, or leave the office if you’re uncomfortable. Don’t be embarrassed to ask questions. Never judge a person’s integrity by how they look, sound, or dress. Watch out for those people in your life who may be vulnerable to Con Artists.

19. Before the Investment Remember the 4 “C”s: Compare with other investment options, Consult with someone you trust, Call our division, and Check out the salesperson!

20. Before the Investment Again, The Bottom Line Is: Make sure that you are comfortable with the investment, and that it is suitable for your financial objectives, your risk tolerance, and your time horizon.

21. After the Investment Your investment responsibilities do not end once you have selected a broker and an Investment product. You need to: Keep your records in a safe place. Monitor your account and investment holdings on a regular basis. Be equally vigilant with each new opportunity; never let your guard down!

22. After the Investment If you feel that you’ve been the victim of an investment scam: Contact the salesperson, broker, or manager. Do not be embarrassed to report it. Do not delay in reporting it. Contact our agency, and law enforcement.

23. After the Investment Formal ways to resolve a dispute: Litigation Arbitration Mediation

24. After the Investment What is litigation? Litigation is the act of instituting a legal contest by judicial process.

25. After the Investment What is arbitration? Arbitration is a process of dispute resolution in which a neutral third party makes a decision after a hearing where both parties have the opportunity of presenting their case.

26. After the Investment What is mediation? Mediation is an informal alternative to arbitration. In this process, a neutral third party helps disputing parties to reach an agreement. Unlike an arbitrator, the mediator has no power to impose a decision on the parties.

27. Resources Division of Finance and Corporate Securities 350 Winter Street NE, Room 410 PO Box 14480 Salem, OR 97301 main number: (503) 378-4140 toll free number: (866) 814-9710 www.oregondfcs.org dcbs.dfcsmail@state.or.us

28. Resources Oregon Department of Justice 1162 Court Street NE Salem, OR 97301 (503) 378-4400 (877) 877-9392 www.doj.state.or.us consumer.hotline@doj.state.or.us

29. Resources Securities and Exchange Commission 450 Fifth Street, NW Washington DC, 20549 (202) 942-7040 (800) SEC-0330 www.sec.gov help@sec.gov

30. Resources National Association of Securities Dealers Two Union Square 601 Union Street Seattle, WA, 98101 (206) 624-0790 (800) 289-9999 www.nasdr.com

31. Resources North American Securities Administrators Association 10 G Street NE Suite 710 Washington DC 20002 (202) 737-0900 www.nasaa.org info@nasaa.org

32. Resources Federal Trade Commission 600 Pennsylvania Avenue NW Washington, DC 20580 1-877-IDTHEFT www.consumer.gov/idtheft

33. Resources Social Security Administration Fraud Hotline 1-800-269-0271

34. Resources Federal Reserve Bank Financial Literacy Site www.FederalReserveEducation.org

35. Resources US Postal Inspector Fraud Line 1-800-275-8777 www.usps.gov

36. Resources You are entitled to one free credit report each year from each of the 3 major credit reporting agencies. You can order them at: www.annualcreditreport.com

37. Resources Tom Martino Consumer Advocate/Radio Personality www.troubleshooter.com

38. Resources Clark Howard Consumer Advocate/Radio Personality www.clarkhoward.com

39. The Wrap Up The best prevention against abusive investment schemes is a properly educated investor

40. The Wrap Up The best prevention against abusive investment schemes is a properly educated investor Forewarned is forearmed when Con Artists call

41. The Wrap Up The best prevention against abusive investment schemes is a properly educated investor Forewarned is forearmed when charming thieves call All investments carry risk

42. The Wrap Up The best prevention against abusive investment schemes is a properly educated investor Forewarned is forearmed when charming thieves call All investments carry risk Rarely does the victim of a scam get any money back, so ask questions before you write that check or sign any agreements!