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For
Immediate Release: |
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For
Further Information Contact: |
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March
24, 2005 |
Office
of The Attorney General
-
Peter C. Harvey,
Attorney General
Bureau
of Securities
- Franklin L. Widmann, Chief |
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Peter
Aseltine
609-292-4791
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Attorney
General Warns Investors of Top 10 Scams
for 2005
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TRENTON
- Attorney General Peter C. Harvey and
the New
Jersey Bureau of Securities today
issued a warning about the Top 10 scams
that con artists are likely to employ
in 2005 to cheat investors out of their
savings.
“Although
few decisions we make are as important
as how we invest for our long-term financial
security, it’s easy to be confused
by the complex array of investment options
available,” Attorney General Harvey
said. “Con artists prey on that
confusion and the fears that investors,
particularly the elderly, have about their
finances. It’s tempting to jump
at the promise of a high return to try
to improve your financial outlook. We
urge investors to be wary of big promises
and to call the Bureau of Securities before
investing to ensure that salespeople and
investments are legitimate.”
The New Jersey Bureau of Securities (BOS)
registers and regulates individuals and
firms that provide investment advice or
sell securities in New Jersey. These securities
include stocks, bonds, mutual funds and
other investment vehicles. The BOS can
be contacted at 973-504-3600
or through Consumer Affair’s Web
site at www.NJConsumerAffairs.gov.
“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 Franklin L. Widmann, Chief of the
New Jersey Bureau of Securities and President
of the North American Securities Administrators
Association (NASAA).
This
ranking of Top 10 threats to investors
for 2005 is based on the order of prevalence
and seriousness as identified by an annual
survey of state securities regulators
conducted by NASAA:
-
Ponzi
Schemes:
Named for Charles Ponzi, who in the
early 1900s swindled investors out
of $10 million by promising 40 percent
returns, these schemes are a perennial
favorite among con artists. The premise
is simple: promise high returns and
pay early investors with money raised
from later investors. Inevitably,
the schemes collapse and the only
people who make money are the promoters
who set the Ponzi in motion.
- Unlicensed
Individuals Selling Securities:
Anyone selling securities without a
valid securities license should be a
red alert for investors. Remember: No
license, no sale.
- Unregistered
Investment Products:
Con artists bypass stringent state registration
requirements to pitch viatical settlements,
pay telephone and ATM leasing contracts,
and other investment contracts with
promises of “limited or no risk”
and high returns.
- Promissory
Notes:
These short-term debt instruments often
are sold by independent insurance agents
and issued by little known or non-existent
companies promising high returns –
upwards of 15 percent monthly –
with little or no risk. When interest
rates are low, investors often are lured
by the higher, fixed returns that promissory
notes offer. These notes, however, can
become vehicles for fraud when the issuer
of the note has no intention or capability
of ever delivering the returns promised
by the salesperson.
- Senior
Investment Fraud:
Because they have built 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.
- 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.
-
Internet Fraud:
Stock promoters are using online “boiler
rooms,” instant messaging, and
fake websites to lure investors into
“pump-and-dump” stock schemes,
in which the promoter creates a false
demand for a stock, temporarily raising
its price, then sells or “dumps”
the stock at the inflated price.
-
Affinity Fraud:
Con artists know that it’s only
human nature to trust people who are
like yourself. Con artists are increasingly
targeting religious, ethnic, cultural
and professional groups, using the victim’s
group identity to gain his or her trust.
- Variable
Annuity Sales Practices:
Senior investors, in particular, should
beware of the high surrender fees and
steep sales commissions agents often
earn when they move investors into variable
annuities. The benefits of variable
annuities – tax-deferral and death
benefits, among others – come
with strings attached and additional
costs. Some investors are misled with
claims of guaranteed returns, when variable
annuity returns actually are vulnerable
to the volatility of the stock market.
Variable annuities make sense only for
consumers willing to invest for 10 years
or longer. They are not suitable for
many retirees who cannot afford to lock
up their money for a long time.
- Oil
and Gas Scams:
With the Middle East unstable and oil
above $50 a barrel, regulators warn
that con artists may renew schemes promising
quick profits in oil and gas ventures.
Also
cited for “dishonorable mention”
are penny stocks, private placements and
investment seminars. NASAA offers additional
information about each of the Top 10 scams,
as well as tips on detecting con artists
and avoiding fraud, in the NASAA Fraud
Center at www.nasaa.org.
Before
making any investment, Widmann urged investors
to ask the following questions: Are the
seller and investment licensed and registered
in New Jersey? 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?
#
# #
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