One call can bring down a house of cards Published June 15, 2007 By Debora Whipple New Jersey Bureau of Securities, Office of the Attorney General MCGUIRE AIR FORCE BASE, N.J. -- Many think that to be an investor you are probably putting money into the stock market. If you're not in the market, you might think you're not an "investor." This could mean that when securities warnings are provided, you really don't listen since you believe you don't need to know about securities fraud. Right? Wrong! What is really an investor? Anyone who saves, or has ever saved, can be defined as an investor. An investor can also be described as someone who puts money into an investment with the expectation of a profitable return. Ninety percent of America's 75 million baby boomers may be defined as investors. As an investor, you should be clear on some misconceptions. One, you can be defrauded without ever having "invested." And two, research has demonstrated that even sophisticated investors, who rely on financial advisors and individual brokers, can be particularly susceptible to securities fraud. Seniors, physicians and members of the military are a few of the prime targets for securities fraud. Investor protection is a continually growing process. Information from investors, who contact their securities administrators to report scams or question the handling of their accounts, provides a necessary foundation for investigative cases to be opened. Investors quite possibly do not realize the power they hold to actually stop scam artists. The investor can potentially stop a run of crime from affecting other victims by contacting the agency that regulates the sale of securities. As an example, some cases start from one person calling the Bureau of Securities, New Jersey's state's securities regulator. A person may call to ask for information about an investment, someone they want to handle their money or, most importantly, someone they have a complaint about. Here's what a call can do: A recent case resulted in a more than 73 million dollar judgment. A major case was opened from a call from a single investor, whose life savings was tied up in an investment. Not satisfied with the handling of the investment and the surrounding concerns, he called the bureau. The bureau investigated and was able to get his money back within 24 hours. But then, doing what it does to protect investors, the enforcement unit of the bureau looked deeper into the case. The Bureau uncovered losses incurred by more than 200 investors who had been scammed. Additionally, one of the fraudsters was sentenced to prison for 14 years. No matter how much money and how educated you are, you can still be scammed. One victim was even a quite-famous author who openly acknowledged that she had lost millions in this investment. Clearly many investigations come from one call that alerts agencies, like the bureau, that know the signs of fraud. Investigations can result in the appointment of a receiver for the stolen money, or what's left of it. The assets can be frozen in an attempt for the court-appointed receiver to return some money to the investors. Many times, if the case is discovered too late, there is no money to be returned. The scam artist has lived luxuriously on your money. Signs of fraud can include a rollover feature, guaranteed or risk-free investments - signs that seem simple and unsuspecting to most investors. Unlicensed agents even approach groups such as those in organizations, universities or private clubs with good financial advice. The problem begins when the agents are not checked out with the Bureau of Securities before allowing them to speak to the group. The agents should be checked out to verify that they are registered to sell or advise on securities. Although they may be selling for recognized financial institutions, they may not be registered, as is required by securities law, which was created for your protection. Investors trust the advice for referrals of agents or investment advisors, from friends, relatives and associations through organizations. But who has checked to see if the person has a history somewhere of doing business in a fraudulent manner? A full 63 percent of Americans continue to regard their friends as their primary source of information on financial matters. An amazing 42 percent rely heavily on sources such as the Internet chat rooms, blogs, and other media for news and information. Who are these people behind these bits of information? Often they are professional scam artists. It's time for investors to do their homework. Call the state securities regulator, the New Jersey Bureau of Securities of the Office of the Attorney General to get a CRD report. A CRD report comes from a national database which holds the background information of the person selling you the investment. It's one quick call. It's a call that costs while not making the call can cost you everything. Really! Money, for most, is hard earned but easily lost to the average, knowledgeable, trustworthy agent who - is either not an agent after all or who is a clever, professional --scam artist -- just doing what he does best. He takes your money but you gave it to him. Investors should call the Bureau before doing anything, even before you give your name and address. Know who you are dealing with. A call to the New Jersey Bureau of Securities at 1-866-I-INVEST and a request for a CRD report will be a good start. Questions can be emailed to askbureauofsecurities@lps.state.nj.us. Investors might find it interesting to go to the website at www.njsecurities.gov for information on the top 10 scams, enforcement cases, press releases, checklists to use when dealing with an agent and to play an interactive scam game. With actual information about the agent, an informed decision can be made. Above all, make sure the person is registered. Many investors, from all frames of life and financial standing, have been securities fraud victims, and yet, if they had checked with the Bureau before investing or even when suspicious after already investing, they could have been one of the informed investors who avoided losing their money to fraud. McGuire Family Support, Personal Financial Management Program offers educational workshops in which the Bureau participates. For more information, please call Erica Zeiger at the base at 609-754-5344. The bureau does not make any recommendations for specific investments or referrals for individual agents or broker-dealers.