Securities Bulletin

              SECURITIES bulletin
One of the biggest financial news stories
of this year is the impending merger of
NASD and NYSE. An area that will be
affected by the merger of these two
self-regulatory organizations is arbitra-tion.
While in some cases arbitration is a
faster and less expensive proposition
than court litigation, investors forfeit
certain legal rights by going to arbitra-tion.
For example, when arbitration is
complete, the decisions of the arbitra-tors
are final and there is almost no
change of court review.
NASD has taken several steps in the past
two years to improve the arbitration
process, but more needs to be done.
NYSE now does not allow motions to
dismiss, which is good because the arbi-tration
forum is the one place investors
can tell their stories and present evi-dence.
Other areas need to be
addressed, however, such as abuses in
the discovery process and arbitrator
qualifications.
The NASD and NYSE merger will result in
only one arbitration forum. I encourage
those who oversee it to implement any
changes necessary to make it a fair
forum for all. I also encourage investors
who have a complaint about a broker
or advisor or who have a complaint
about their treatment during the arbitra-tion
process to contact
the Securities
Department at 800-
628-7937.
Jesse White
Secretary of State
WINTER 2007
Investors are urged to carefully monitor their online trading accounts. The
Securities Department has been alerted to a number of “hack attacks” in which
predators have broken into customer accounts at online brokerages in the United
States and Canada and made unauthorized trades worth millions of dollars.
Federal and industry authorities are investigating recent cases in which hackers
gained access to customer accounts at several large online brokers and used the
customers’ funds to buy certain thinly traded microcap securities or “penny
stocks.” The hackers appeared to be running a “pump and dump” scheme, trying
to drive up share prices so they could sell the stocks at a profit.
These scams typically begin with a hacker obtaining customer passwords and user
names and then liquidating a person’s existing stock holdings and using the pro-ceeds
to buy shares of the microcap stocks. The hacker then wires the money to
either an offshore account or through a series of straw men or dummy corporations.
Investors can guard their online financial information from predators by following
the tips below. For more information about online investing and how to protect
yourself from fraud, visit the Investing Online Resource Center at
www.investingonline.org, or the Securities Department at www.AvoidTheScam.net.
Protect your online investments
• Ask your online brokerage to always confirm all transfers and transactions.
• Never use unprotected computers when accessing your financial accounts.
• Keep your computer’s security features updated (i.e., Web browser, virus scan
software, firewall).
• Never provide your online account information when requested by e-mail. Do
not respond to unsolicited e-mails from companies you do business with
requesting that you revalidate your personal information or provide a link to
Web sites that require you to revalidate your account information.
• Before entering your personal information on any Web site, look for the “locked
padlock” icon on the browser bar or “https” at the beginning of the Web
address to ensure the site is secure.
• Change passwords regularly.
• Log off the Web site after you have submitted an application or concluded a
secure online session.
• When your computer is not in use, shut it down or disconnect it from the
Internet.
• If you think you may have fallen victim to an online scam, change your pass-words,
contact your online brokerage immediately, and monitor your account
activity closely.
• If you see any inaccuracies concerning your account, contact your online bro-kerage
immediately.
Monitor online accounts carefully
IN
THIS
ISSUE
• MONITOR ONLINE ACCOUNTS CAREFULLY •
• WAUKEGAN FINANCIAL ADVISOR SENTENCED FOR DEFRAUDING ELDERLY •
• FAQ: INVESTMENT ADVISOR DEFINITION/REGISTRATION EXEMPTIONS •
• INVESTOR EDUCATON SIMULCASTS •
• INVESTIGATORS SURPRISED BY ALLIGATORS AND SHARKS •
A NEWSLETTER OF THE ILLINOIS SECURITIES DEPARTMENT • SECRETARY OF STATE JESSE WHITE