Secretary of State Cox Names Top 10 Threats to Investors

ATLANTA … Secretary of State Cathy Cox today identified the most common ploys being used to cheat Georgia investors out of millions of dollars each year.

The ranking of the top 10 threats to Georgia 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):

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.

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 the promise of “limited or no risk” and high returns.

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

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.

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.

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

Affinity Fraud: Con artists are increasingly targeting religious, ethnic, cultural, and professional groups.

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.

Oil and Gas Scams: With oil topping $50 a barrel and continued Middle East instability, regulators warn that con artists may renew schemes promising quick profits in oil and gas ventures.

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

Secretary Cox urged investors to ask the following questions before investing their hard earned money: 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?

Cox also urged Georgia investors to contact the Secretary of State’s Securities Division at 404-656-3920 with any questions about an investment product, broker or adviser, before making an investment. “One phone call to our Securities Division can save a lot of money and heartache,” she said.

For more information on these and other fraudulent schemes, visit the NASAA Fraud Center at www.nasaa.org. 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.