Wells Fargo Has to Earn Your Trust Back. Again.

By: Eddie Greenblat, Fall 2018 IAC Student Intern

I think the Black Keys might be getting another call from Wells Fargo.

The Justice Department is currently investigating if Wells Fargo’s wholesale banking unit improperly altered customer information. The Wall Street Journal reported that the wholesale banking unit has allegedly improperly altered customer documents to add social security numbers and dates of birth. This is not the first issue Wells Fargo has dealt with in recent months.

Yahoo Finance provides a detailed history of all of Wells Fargo’s issues since September 2016 here.  Some of the highlights from Yahoo Finance are listed below: Continue reading

SEC Charges for Alleged Fake Day-Trading Firm

By Ben Dell’Orto Student Intern Fall 2018

These days, anybody can create a website. Sometimes it’s even a really good one.

A few alleged fraudsters were able to create a fake day-trading website called Nonko Trading. The website claimed that investors could operate their own investment accounts, trading investments on the market in a similar fashion to a website like E*TRADE. However while E*TRADE allows investors to take the reins on their own portfolio (albeit in a tremendously risky fashion), Nonko allegedly simply took the money and ran. Continue reading

“Dude, Where’s My Money?”

By: Dowdy White, Spring 2018 IAC Student Intern

According to a comedic sketch from Jimmy Fallon, a “new report claims that William Shakespeare was a big marijuana user and may have been high when he wrote some of his plays . . . which explains that one line: ‘To be, or not to be… Wait. What was the question?’” If you’re a fan of late night comedy television, the odds are that you have heard plenty of jokes revolving around the debate about medical and recreational marijuana use in the United States. However, there is one aspect of this debate that really is no joke: marijuana-related investments.

According to the U.S. Securities and Exchange Commission (SEC), there has been in an increase in the number of investor complaints regarding marijuana-related investments. Specifically, investors have been lured into investing in marijuana-related companies with the promise of extremely high returns only to have their entire investments disappear. The SEC warns investors that “fraudsters often exploit the latest innovation, technology, product, or growth industry [like marijuana]” to bait investors into fraudulent or dangerous investments. Continue reading

Investor Alert: Boiling Frogs and Avoiding Debt

By: Dowdy White, Spring 2018 IAC Student Intern

There’s an old fable that says if a frog is suddenly dropped into a pot of boiling water, the frog will jump out, but if a frog is put into a pot of lukewarm water that is slowly brought to a boil, the frog will not become aware of the danger and will be cooked to death. Poor frog. You may be wondering why this backyard bayou experiment is relevant to the world of investing. Well, that answer is simple: anyone who takes out a loan or opens a credit card account can quickly become a frog in a pot of boiling water. What may seem like an insignificant credit card charge for a quick dinner at Chick-Fil-A or a small loan taken out from a friend can quickly add up to what could be insurmountable debt.

Anybody from your neighbor, Karen, to famous athlete Mike Tyson can tell you that one of the easiest things to do in life is fall into debt. Luckily, our friends at FINRA and the FINRA Foundation have developed SaveAndInvest.org, which is an online tool to help “all investors make informed financial decisions.” On this website, the FINRA Foundation gives investors a wide variety of ways to manage and avoid debt. Let’s check some of these out and see if we can get you on the right financial track or if needed, help you pay off some bills. Continue reading

Investing Crosswords: Common Schemes

Unfortunately, the realm of investments and personal finance involves many different forms of nefarious activity.  Fraudsters quickly adapt to the changing financial policies, oftentimes using technology to take advantage of the naivety of unsuspecting victims.

Schemes involve major enterprises such as pyramid schemes, Ponzi schemes, fake check fraud, recovery schemes, and pump and dumps. Other fraudulent activity may be less organized on a smaller, tactical scale. Phantom riches, source credibility, social consensus, reciprocity, and allusions of scarcity are all methods in which fraudsters, tortfeasors, and ill-reputed financial advisers convince investors to part with their money.

Fake check fraud happens where a victim is convinced that they’ve won a contest and just need to wire money to the fraudster in exchange for a check, which is, you guessed it, fake. In a pump and dump scheme, fraudsters attract investors to a stock, and once the price increases based on the increased interest, the fraudsters sell off their shares.

Sometimes fraudsters will embellish facts to mislead investors. By appealing to the investor’s values, fraudsters will trick investors into believing the investment is more credible, profitable, and well known than it actually is.

Phantom riches involve fraudsters attracting investors by promising unrealistic wealth, dangling financial bliss in front of the victim. While source credibility tricks work by name-dropping a well-known firm or an expert, social consensus works by suggesting that lots of people trust the investment, respectively. Reciprocity involves the fraudster promising something in return for investing.

Vigilance, education, and a healthy dose of skepticism are simple ways in which investors can protect their money. It is important to remember that not only laymen become victims of these schemes, but also professionals such doctors, lawyers, and business men and women. Con artists and shady brokers are experts in finding ways to separate money from their victims. Diligently follow-up on investment opportunities before providing any financial information.

Now try our puzzle!

Down Continue reading

Fintech… Welcome to the world of tomorrow!

By G. Kevin Mathis, Fall 2018 IAC Student Intern

First, what is Fintech? Defining Fintech is difficult because currently a consensus definition of Fintech is nonexistent.  Patrick Schueffel, a professor of Finance with the Institute of Finance, School of Management Fribourg in Fribourg Switzerland wrote an article, Taming the Beast: A Scientific Definition of Fintech, in which he aimed to define Fintech. Continue reading

Investor Crossword Puzzles: Conflicts of Interest

Investors are not the only individuals that stand to gain from investment transactions. Brokers, Investment Advisers, and Member Firms all have some sort of stake in the investment transactions. Most commonly, brokers and investment advisors have a financial incentive in buying and selling funds through commissions. Commissions are the fees paid to a broker by an investor for executing a trade. Additionally, brokers may earn money through mark-ups. Mark-ups are the difference between the market price of a security and the price at which a broker-dealer buys or sells that security directly from or to a customer.

There are also different types of accounts which help the brokers generate revenue. One of these accounts is known as a wrap account. The fee is typically calculated based on the total market value of the account, and it includes the management, brokerage, and administrative expenses for the account.

Another account which helps the broker generate revenue is known as a margin account. In these accounts, the broker lends the investor part of the money, which allows the investor more income potential on each of his investments. However, if the investment does not perform, the investor might be on the hook for the broker’s money too!

Finally, a common and precarious conflict of interest may come from proprietary funds. These can include house-brand mutual funds created when the brokerage firm that distributes the fund also acts as investment adviser for the fund, including both the management and distribution of the fund. When a firm sells proprietary funds it is difficult to ascertain who exactly the broker is looking out for. The more they sell of the house-brand fund, the more impressed their supervisors may be. However, this may come at the price of unsuitable recommendations for the investor.

Never be afraid to discuss these conflicts with your broker or investment adviser.

Across Continue reading