Beware of EB-5 Fraud

By Becky Clapes, Guest Blogger

The EB-5 program allows non-citizens to invest $1 million in a commercial enterprise that creates a minimum of 10 new full-time jobs within two years or saves 10 pre-existing jobs that were at risk in a troubled business. Once the two years has passed, the investor may then apply to become a legal permanent resident and then eventually, apply for citizenship.

While the EB-5 program has created many new businesses and the revival of troubled businesses, it has also been stricken with scam artists. The most common types of scams involve scam artists preying on investors to put their money into illegitimate businesses or fake regional centers. Continue reading

Beware of the “Grandparent” Scam

By Becky Clapes, Guest Blogger

Telephone and email scams are both vicious and persistent. They are often aimed at the elderly, who do not always have access to resources and information which would allow them to know the scam is just that, a scam. One of the more common telephone scams is known as the “grandparent scam”.

Scammers will call the elderly person pretending to be a grandchild. The scammer will open with, “Hi Grandma, do you know who this is?” The grandparent will then guess the name of the grandchild the scammer sounds most like, which allows the scammer to establish an identity.

The fake grandchild scammer will then ask the grandparent to send them money for travel, or bail, or medical expense, or something of the like. Typically the scammer will ask the money be paid via Western Union Money Transfer or some other form of money wire. The scam artist will then conclude by appealing to the grandparent’s need to help their grandchild by saying, “Please don’t tell my parents. I don’t want to get in trouble.”

To report an incident of fraud or scam, click here.

For more information on senior citizen scams, see the NCOA website.

For another blog post on telephone scams, see here.

Regulatory Notice 16-18: Recruitment Practices, Stealing Clients, or Maintaining Relationships – Rule 2273

By Becky Clapes, Guest Blogger

When representatives of investment firms leave their old firm for a new one, they often contact their former clients, telling them the “benefits” of transferring their investment from the representative’s old firm to his or her new one. The client may have built a relationship of trust with a representative which is a large motivating factor to move firms along with the representative. However, often, representatives do not tell their clients what it truly means to move investments, particularly, the costs that can be incurred. FINRA proposed Rule 2273 to provide clients with a more complete picture of what transferring assets truly means and what clients should consider when deciding whether or not to transfer assets.

The new rule requires that when investment firms hire associates with former clients from prior firms, the associate or firm provide education communication packets to the clients which were prepared by the FINRA. Firms are required to deliver the communication packets when:

  • They, either directly or through a representative, contact a former client of the representative in an effort to have the client transfer assets
  • A former client transfers assets to the representative’s new firm

When delivering educational communication to clients, firms must:

  • Deliver either oral or written information
  • Tell the former client that he or she is associating with the new firm
  • Discuss fees with the former client and pricing at the new firm.

The Georgia State College of Law Investor Advocacy Clinic filed a comment on then proposed Rule 2273 in January of this year.  For more information see here.

Lights, Camera, Fraud: Movie Producer Allegedly Defrauds Investors

By Becky Clapes, guest blogger

On November 9, the Securities and Exchange Commission charged a movie producer with defrauding investors via hedge funds, stealing money to live a lavish life. Throughout 2011 and 2012, the SEC alleges that David Bergstein stole millions of dollars from investors, using the stolen funds to buy himself watches, guns, jewelry, and more. Bergstein’s scheme allegedly involved having investors put money into hedge funds, which he would proceed to transfer into unregistered hedge funds and then into his own pocket. In two transactions alone, Bergstein allegedly stole $2.3 million and $3.5 million. The SEC has charged Bergstein with violating the Securities Exchange Act and Rules and various aiding and abetting violations.

Phantom [Accounts] of the Opera

By Becky Clapes, Guest Blogger

Unfortunately, it is possible for scam artists to open bank accounts and credit card accounts in your name. According to Alert Investor one of the more common forms of financial fraud is when a scam artist steals your information and opens credit card and bank accounts in your name. Below are several ways to monitor your accounts to both avoid this happening to you as well as where to report fraud if you see it on your account.

Continue reading

Online Safety: Planning for Diminished Capacity

By Becky Clapes, Guest Blogger

The SEC’s Office of Investor Education and Advocacy and the Consumer Financial Protection Bureau’s Office for Older Americans recently released their number one piece of advice on preparing for your financial future. “Hope for the best, but plan for the worst.”

As a person’s capacity declines, so does his or her ability to mange money and financial assets. This “diminished capacity” makes individuals more susceptible to financial abuse and fraud.

Here are a few things you can do to protect yourself from financial abuse and fraud in preparation for the potential of diminished capacity.

  1. File and organize your financial documents. Keep them safe and organized and give copies to trusted friends or family.
  2. Keep a list of passwords, PINs, safe-deposit boxes, keys, and other important financial information.
  3. Have an emergency contact for your financial advisers. In case of an emergency, your financial advisers can contact this person if unable to contact you.
  4. Consider having a durable financial power of attorney. This person would have the legal power to make financial decisions for you if you become incapacitated.
  5. Keep all of your financial and personal information as up to date as possible.
  6. If something seems amiss, speak up!

For more information about planning for incapacity, follow this link.

IAC Welcomes Becky Clapes

Becky Clapes, a third year law student at Georgia State University College of Law, is a guest columnist for the Investor Advocacy Blog. She graduated from the University of Maryland with a degree in government and politics and will periodically be writing posts for the blog. When she is not in the library studying, Becky enjoys hiking with her black lab puppy and trying new restaurants. Becky will graduate in May 2017 and hopes to work as a civil litigator.