CHAPEL HILL, N.C.
Potential securities investors should follow Ronald Reagan’s advice: “Trust but verify,” a state official told a group of Carolina Meadows residents recently.
In even stronger terms, John Maron, Director of the Investor Education Program of the North Carolina Securities Division, warned, “It sounds trite, but if an investment sounds too good to be true – IT IS!!!
The warnings were appropriate for his audience. Citing AARP statistics, Maron said 57 percent of securities fraud victims at least 50 years old. This age group, he added, is the No. 1 target of fraudsters.
He then explained that the Securities Division, an arm of the Department of the Secretary of State, administers and enforces securities laws and responds to complaints about securities and those who sell them. It has information on all registered brokers and investment advisers in the United States, whether registered in North Carolina or not.
“We are a law enforcement agency. “We act as the regulator. We are the referee on the playing field. We help ensure public confidence in the marketplace.”
He urged uncertain potential investors to contact the Securities Division at 1-800-688-4507 or check the department’s website – www.sosnc.com – for information about broker-dealers and investment advisers and scams.
“We’re here for you,” he said.
Maron recalled the case of J.V. Huffman Jr., who scammed some $25 million from investors and was sentenced in January to more than 30 years in prison. “One phone call might have shut him down.”
He also discussed affinity fraud, which aims at people who share a common characteristic. Victims can include seniors and members of ethnic, religious, professional or civic groups. Fraudsters within these groups argue, “You can trust me, because I’m just like you.”
“Free lunch” seminars were another Maron target. It’s not illegal to invite potential investors to luncheons or dinners, he said, but these events “are really sales presentations.” Some sponsors, he said, contemptuously and cynically refer to attendees as “plate lickers.”
A 2007 study by the Financial Industry Regulatory Authority (FINRA), the largest independent regulator for U.S. securities firms, found that one-third of the seminars it reviewed contained misleading statements.
Maron illustrated that finding by displaying an invitation that offered guests an opportunity to “Protect Your Nest Egg from the Retirement Vultures” and the services of a “Senior Estate Planning Specialist.”
If you attend such an event, “Leave your checkbook at home.” Maron advised.