securities law

Companies may pay people to write online newsletters recommending the stocks of these companies. Federal securities laws require the newsletters to disclose who paid for their product, the amount, and the type of payment. Many fraudsters fail to do so and instead masquerade their newsletters as sources of unbiased information, when in fact they stand to profit if investors follow their advice and purchase or sell certain stocks.

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In a promissory note scam, the con artists often stay behind the scene. They persuade honest, independent life insurance agents to sell promissory notes by promising them large commissions. The agents often rely on the information they have been given, and they may not know that the information is false or misleading. The fraudsters use a portion of the money they collect from investors to pay the sellers their commissions. They typically abscond the rest. A promissory note is a form of debt, like a loan that a company may issue to raisemoney.

Viatical settlement is a method for an insured person with an abbreviated life expectancy to "cash out" of a life insurance policy before death. An investor would buy a life insurance policy of a terminally ill person at a price that is less than the death benefit of the policy. When the seller dies, the investor collects the death benefit. The return depends on the seller's life expectancy.

Systematic Investment Plans (SIP) are regulated as Periodic Investment Plans under the federal securities laws. The primary objective of a SIP is to enable investors to clearly define an investment goal and then to help them reach it. While the majority of these plans are sold to military personnel, they are also sold to civilians. These plans allow you to accumulate shares of a mutual fund indirectly by making small regular monthly payments, usually as little as $50, over a period of 10, 15 or 25 years. Individual plans can differ from one another.

Prime bank fraud is an investment scheme that offers promises of extremely high yields in a short period of time. Fraudsters claim they have access to secret financial products which they can buy at a discount and sell at a premium. Through reselling the products multiple times, fraudsters claim to produce high investment returns. Scam artists promoting these schemes often associate the financial products they are selling to top world banks or secret government banking systems for the elite to give their products legitimacy.

"Pump and Dump" is a type of micro-cap stock fraud involving the use of false or misleading statements to increase stock prices and then sell the inflated stocks to the public. Micro-cap stock refers to companies with low capitalizations and typically limited assets. Many microcap stocks trade on the over-the-counter market. Microcap stocks often lack reliable, publicly available information about the company and have a limited historical record.

Individuals may call themselves “senior specialists” to create a false level of comfort among seniors by implying a certain level of training on issues important to the elderly. However, the training they receive is often nothing more than marketing and selling techniques targeting the elderly. Bogus senior specialists commonly target senior investors through seminars where the specialist reviews seniors’ assets, including securities portfolios.

Financial seminars are a marketing tool often used by broker-dealers and other entities to attract prospective clients. These seminars may be invitation-only or they may be advertised in local papers or on the internet. Financial seminars are often held at hotels or restaurants and may offer enticements such as free meals, books, or trips for attendees. At these seminars, participants are provided with a sales pitch and sales materials that describe possible investment strategies. These seminars sometimes offer unsuitable sales of securities for attendees.

The Internet can serve as an efficient tool for investors, but it is also an excellent tool for fraudsters. The Internet allows individuals or companies to reach tens of thousands of people by building a web site, posting a message on an online bulletin board, entering a discussion in a live chat room, or sending mass e-mails. It's easy for fraudsters to make their messages look real and credible, but it can be nearly impossible for investors to tell the difference between fact and fiction.

The bonds are long-term securities, but weekly or monthly auctions are held to set the interest rates and give holders the option of selling the securities. ARS were promoted as being as safe as CDs, with a better yield than CDs or money market funds. Consumers were told they would have easy access to their investments. However, because ARS are long term variable rate debt with interest payments determined on a 7, 28, or 35-day basis. When rates rise, interest expense and volatility will rise, making ARS higher risk investment than fixed rate debt.