Securities Bulletin

              The volatile financial markets and interest rates at 40-year lows
have left investors shell-shocked, scared and especially vulnerable
to con artists who promise safe and high-yielding havens for their
money.
In conjunction with the North American Securities Administrators
Association (NASAA), the Securities Department is cautioning
investors to be wary of anyone promoting investments that yield
"safe" or "guaranteed" returns above prevailing market levels.
”If a company or individual is promising above-market returns at
low or no risk, be very skeptical, ask lots of questions and get it in
writing,” warns Secretary of State Jesse White. “When evaluating
any investment, consumers need to keep in mind that the higher
the reward, the higher the risk. If a company is promising a high
yield and a low risk, it is more likely that fraud is involved.”
The bear market on Wall Street and corporate scandals have
shaken investors' faith in the market. Record amounts of money
are now pouring into savings accounts, in some cases yielding
returns below the inflation rate. Low interest rates are particularly
hard on seniors or retirees, who depend on interest income. Con
artists know investors dependent on interest income are looking
for alternatives, so they pitch returns on their investments as "safe
and guaranteed."
Many investment vehicles have been singled out as potentially
very risky or fraudulent, including:
$ short-term promissory notes in little-known companies,
$ improperly disclosed callable CDs,
$ bogus prime bank schemes, and
$ viatical settlements.
The promoters of these schemes promise high returns and low or
no risk. The most recent list of Top Ten Investment Scams can be
found in the Securities Department’s Investment Guide for Illinois
Consumers. For a copy of the guide, please call 800-628-7937.
Securities fraud costs Illinois investors millions of dollars each year.
Before purchasing any investment, call the Illinois Securities
Department at 800-628-7937 and ask if the seller and investment
are licensed and registered in Illinois. If they are not, they may be
operating illegally.
SECURITIES bulletin
The downturn in the financial markets and
flow of negative reports from corporate
America has shaken investor confidence and
angered many Americans. Many of us have
watched our brokerage accounts and
pension funds diminish over the past year.
Congress and federal regulators are dealing
with corporate scandals by passing
legislation, such as the accounting-reform
bill. While I support this federal legislation, it
is important to note that we in Illinois have
already taken steps to protect investors
against these types of fraudulent practices.
State regulators, such as the Securities
Department, have actively enforced state
laws that prohibit sellers of securities from
misleading the public, making
misrepresentations and engaging in fraud. It
was state securities regulators who brought
actions against research analysts who issued
“buy” recommendations based on business
relationships rather than sound research.
State regulators also prompted the
brokerage industry to change its practice of
interfering with customer account transfer
requests. No case is too small for state
regulators to pursue.
If you believe you have
been a victim of fraud,
please contact the
Securities Department
for assistance.
Jesse White
Secretary of State
Fall 2002
Bear market on Wall Street
means bull market on fraud
IN
THIS
ISSUE
• BULL MARKET ON FRAUD •
• INVESTOR EDUCATION IN CHICAGO •
• NEW SECURITIES RULES •
• ENFORCEMENT ORDERS •
• AUDIT DIVISION REPORT •
A NEWSLETTER OF THE ILLINOIS SECURITIES DEPARTMENT • SECRETARY OF STATE JESSE WHITE