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State Securities Regulators Offer Tips and Resolutions for Safe Investing

WASHINGTON, D.C., December 13, 2007 – The North American Securities Administrators Association today cautioned investors not to let the spirit of good tidings and giving lead them into risky investment schemes this holiday season.

“Investment fraud does not take a holiday,” said Karen Tyler, NASAA President and North Dakota Securities Commissioner. “The holiday season is a time of generosity. Unfortunately, it’s also the time of year when criminals aggressively seek to exploit the holiday spirit of goodwill.”

State securities regulators are concerned that this predatory conduct, combined with a convergence of financial challenges – higher gasoline prices, a volatile stock market, lower housing values, and general economic unrest – may lead individuals to make hasty, ill-informed decisions in the pursuit of higher returns on their investments. NASAA urges investors to be especially vigilant in protecting their assets from Internet, telephone and in-person promotions for alternative investment opportunities.

In testimony before the U.S. Senate Committee on Banking, Housing, and Urban Affairs, Tyler said investment fraud, a year-round problem, hits home during the holidays when consumers may face a financial crunch with increased expenses from holiday gifts and travel, or may be considering end-of-year investment or tax-savings opportunities.

“The holiday season brings phony investment schemes promoted by unscrupulous individuals seeking to fleece investors for all they’re worth. Take the time you need to understand what you’re investing in,” Tyler said.

Investment fraud also touches seniors, many alone for the holidays, who may be invited to a free holiday lunch or dinner investment seminar. “Fraudsters use the holiday season to prey on the lonely, especially the elderly, who may be more willing to attend a free-meal seminar where they’re fed a hard sales pitch instead of unbiased information,” Tyler said.

A recent joint examination of 110 free meal seminars by state securities regulators, the Securities and Exchange Commission and the Financial Industry Regulatory Authority found that 100 percent were actually sales presentations; half featured exaggerated or misleading advertising claims; and one-quarter involved possibly unsuitable recommendations.

NASAA offered four key defensive actions for investors to use to protect themselves and their money from scamsters this holiday season.

>> First, never give your Social Security number, date of birth or credit card numbers in response to unsolicited e-mail messages or “cold callers” over the phone – no matter how good the sales pitch sounds.

>> Second, don’t make quick and risky investment decisions based upon sales pitches that refer to great deals that will be offered for only a short time or those that offer year-end tax advantages. The end of the year is a favorite time for criminals to roll out various income-tax avoidance schemes.

>> Third, even though the holidays are busy and everyone is pressed for time, investors should find the time to research any investment opportunity – and those who offer them – before even considering investing their hard-earned dollars.

>> Fourth, before investing any money, call your local securities agency to learn more about the salesperson and the investment product being offered for sale. The simplest inquiry is to ask if they are registered to do business in your state. And is the investment allowed to be sold. If one or the other is not registered, that is a sure warning to inquire further. Don’t take the word of a salesperson. Check out the investment yourself.

During her testimony, Tyler also announced that NASAA has issued a new episode in its popular podcast series, The Alert Investor. The new podcast offers a series of resolutions to help investors protect themselves from fraud. For example:

  • Resolve to investigate before you invest.
  • Resolve to make safe investing a family affair.
  • Resolve to check out your broker or investment adviser before investing.
  • Resolve to fight fraud. Make fraud detection part of your routine.

“Unfortunately the rush of the holiday season tends to bring criminals out of the woodwork who seek to prey on your generosity,” Tyler said. “Resolutions like these can help boost your financial literacy to allow you stay ahead of the latest investment trap.”

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, the U.S. Virgin Islands, the provinces and territories of Canada, and Mexico.

NASAA Testimony

For more information:
Bob Webster, Director of Communications
Melinda Semadeni, Investor Education Manager