Who Else Wants To Find a Risk Free Investment?
Susan Ferris, from the SEC, has some interesting Testimony Concerning Elderly Investment Fraud , from her appearance before the U.S. Senate Special Committee on Aging. Ms. Ferris is the Director of the SEC's Office of Investor Education and Assistance. "My Office is the "front door" to the Commission for individual investors. Every year, my staff handles tens of thousands of complaints and questions from investors who contact the SEC. And nearly every day, my staff fields telephone calls and receives letters and emails from seniors or from the children and care-givers of seniors."
Ms. Ferris speaks about the difficulty they have in educating investors to avoid fraud, but doesn't slip into the popular refrain that investors just need to be on the look-out for things that are too good to be true.
Ms. Ferris stated "Our examination program aims to detect fraud and other possible violations of the federal securities laws; foster compliance with these laws; and inform the Commission and its staff of compliance issues. The Commission's Office of Compliance Inspections and Examinations (OCIE) uses risk-based techniques to focus resources on those activities that could pose the greatest compliance risk to investors and the integrity of the markets."
I want to quote a long portion of Ms. Ferris's speech, in which she talks about an interesting initiative.
At the SEC, we spend a great deal of time creating and disseminating neutral, unbiased information directed at helping people make wise investment choices and avoid fraud.While we cannot tell investors which products to purchase, we can and do arm them with the information they need to assess various products and investment strategies. The dominant theme of the SEC's investor education materials is "investigate before you invest." We encourage individuals to ask questions and to check out the background and credentials of any salesperson or financial professional they use. In addition, we give investors resources for researching companies and tips for avoiding fraud. We do not copyright any of our materials, and we make them freely available to all, in both Spanish and English. Our goal is to empower investors, to give them the tools they need to evaluate their investment options and make informed decisions.
We know that many seniors, and many children and caregivers of seniors, use the Internet to search for information on investing. That is why we created a page on our website aimed specifically at senior citizens. This page provides links to critical information on investments that are commonly marketed to seniors -including variable annuities, equity-indexed annuities, promissory notes, and certificates of deposit. It also warns against the dangers of listening to the sales pitches of cold-callers and alerts seniors to the very real threat of affinity fraud - scams that prey upon members of identifiable groups, such as religious or ethnic communities, professional groups, or the elderly. Senior citizens who want to learn more can browse through our "Senior Care Package," a collection on our website of our most popular brochures for seniors (which are also available in hard-copy). Illustrative examples of brochures that we publish that might be of special interest to seniors include: Cold Calling and Variable Annuities: What You Should Know.
One of the most successful educational tools that we have found in recent years has been - if you will - running our own con on gullible investors. Experience has shown us that some investors troll the Internet to identify the next "big thing," the next sure-fire investment winner. We have discovered that these folks, some of whom turn out to be victims in the enforcement actions we bring, did not visit www.sec.gov to get the benefit of our prudent, sensible advice before investing in a get-rich-quick scheme. Knowing all of this, we go to our audience, instead of expecting them to come to us. We run a series of fake investment scams on the Internet, all designed to illustrate the warning signs of on-line investment fraud. Each scam boasts a "can't-miss" investment, offering truly unbelievable returns. If the user clicks to invest, he or she gets a message from us about the necessity of researching before investing. Our goal is to warn investors about fraud before they lose their money.
Our most recent foray into the world of Internet fraud is a Katrina-related "fake scam site" at GrowthVenture.com. Like our other fake scam sites, Growth Venture purports to be a no-brainer investment. But if you click to invest, you'll get a stern warning from us, the FBI, U.S. Postal Inspection Service, and NASD. Our other fake scam sites cover initial public offerings, hedge funds, mutual funds, and online newsletters that tout emerging technology and pharmaceutical companies.
This is a new development, and a welcome one. Instead of relying solely on the rational man model, the SEC has apparently realized that its is better to fish where the criminals are trolling instead of hiding on shore.
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