Department of Commerce Consumer Affairs Business Registration Division

Department of Commerce & Consumer Affairs Business Registration Division Commissioner of Securities Office Investor Education Program

Investment Fraud Avoid Being A Victim: Know The Threats That Investors Face State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Ponzi Schemes § Named for the swindler Charles Ponzi, who in the early 1900’s took investors for millions by promising 40% returns. § The premise is simple: pay early investors with money raised from later investors. There is no real underlying business. § Eventually the scheme collapses and the promoters walk away rich. State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Affinity Fraud § It is human nature to trust people who are like yourself. § Con artists are increasingly targeting religious, ethnic, cultural and professional groups by gaining trust and then stealing the savings of members of the group. State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Affinity Fraud § In many cases, even the leader becomes a victim of what turns out to be a Ponzi Scheme or some other fraud. Remember: “Investigate before you invest – no matter who is selling the product. ” State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Unregistered Individuals Selling Securities § Firms and individuals who provide investment advice are required to pass certain examinations and get registered before they can offer their services to the public. § Hawaii law also requires all brokerages and their sales people to be registered under the securities laws with DCCA Securities Compliance Branch. State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Unregistered Investment Products § It pays to remember that legitimate securities investment products not otherwise registered with the federal securities authorities must be registered with state securities authorities before they may be offered for sale to the public. § Call our Compliance office at (808) 586 -2722 to verify if the investment being sold to you is registered. State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Variable Annuity Sales Practices § Regulators are concerned that investors are NOT being told about: § high surrender charges § fees and costs associated with this product § penalties for withdrawals § steep sales commissions that agents often earn when they move investors into variable annuities. State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Variable Annuity Sales Practices § Some investors also are misled with claims of guaranteed returns when variable annuities actually are vulnerable to the volatility of the stock market. State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Senior Designations § Some financial professionals use designations that imply that they are experts at helping seniors with financial issues. § They market themselves by putting designations after their names such as “Certified Senior Specialist”, “Senior Advisor” or “Retirement Advisor”. § These designations are NOT recognized by the state. State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Senior Designations These are the only recognized financial expert designations under the state securities laws: Abbreviation Designation Organization 1 CFP Certified Financial Planner International Board of Standards and Practices for Certified Financial Planners, Inc. 2 Ch. FC Chartered Financial Consultant American College 3 PFS Personal Financial Specialist American Institute of Certified Public Accountants 4 CFA Chartered Financial Analyst Institute of Chartered Financial Analyst 5 CIC Chartered Investment Counselor Investment Counsel Association of American, Inc. State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Senior Designations The following are not recognized as financial expert designations under the state securities laws: Abbreviation Designation 1 CSA Certified Senior Adviser 2 SS 3 SE 4 RA Senior Specialist Senior Expert Retirement Adviser Organization Whatever organization they say they’re with. . . State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Investment Seminars § Promoters of unsuitable investments are increasingly seeking potential investors, particularly seniors. § Promoters offer seminars and a “FREE MEAL”. § Promoters offer these investments with “higher returns and little or no risk”. State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Sales Pitches § Con artists use various sales pitches to lure seniors and others into turning over their money to them. § They use “phrases” to get your attention and to pressure you into acting immediately. § Salespeople who use these pitches can be a relative or friend. State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Avoid Being a Victim § Contact the State Office of the Securities Commissioner to check if the investment product AND the person are registered. § Securities Compliance Branch: 586 -2722 § Deal only with financial advisers, broker dealers or financial institutions having a proven track record with State and Federal authorities. State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Avoid Being a Victim § Ask for written information on the investment product and the business. Read it carefully! § Stay clear of investments promoting no downside or risk. State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

How We Can Help DCCA Securities Branches: 1. Regulate Call 586 -2722 To check your broker/adviser registration 2. Protect Call 586 -2740 To report securities fraud (Toll Free) 1 -877 -477 -2267 3. Educate Call 587 -7400 To request educational information and presentations State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program

Contact Information DCCA Office of the Securities Commissioner 335 Merchant Street, Rm 203 Honolulu, HI 96813 Office Hours: Mon- Fri/7: 45 am -4: 30 pm Website: investing. hawaii. gov To report investment fraud call: 586 -2740 or Toll Free 1 -877 -477 -2267 State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program