Investor Advocacy Clinic: Learning and Helping Others

By Abigail Howd, Spring 2018 IAC Student Intern

Prior to taking the clinic’s prerequisite class, I knew next to nothing about investing. I saw the direct effects of the 2008 recession because my parents were real estate agents with their own investment properties. Beyond that, I paid little attention to the upwards or downwards trends in the stock exchanges. I had heard of the Securities and Exchange Commission, but I must admit, I did not know what it did or what securities were. Even during my time between college and graduate school when I had a fulltime job, investing was never on my mind. I was too focused on paying down my student loans. Investing sounded like something people with a lot of money did for fun to get more money. I knew it could pay off, but it could also be extremely risky.

After taking the class and working in the clinic, I know I was right about something—investing can be risky. However, I was wrong about who invests and why. Our clinic helps investors from all walks of life who have smaller-dollar claims and who could not otherwise afford legal representation. They have many different reasons for investing. Some are planning for retirement, others are trying to help their children attend college, and still others are simply using investments as an additional form of income. Regardless of how much money people invest or their reasons for doing so, the important part is that whomever they entrust with their money has their best interests at heart.

I have learned a lot about securities and the various laws and rules that govern them in the past year. In doing so, I discovered that even knowing the bare minimum, I could help people. I learned that I do not always have to know the answers right away. I just need to know how to find the answers when I need them. My favorite parts of clinic were helping people recover their hard-earned money and realizing how quickly I could absorb a whole new field of law. I am proud of all the things my team was able to accomplish over the semester. Mainly, I am grateful for the opportunity to develop my professional identity while working on real cases and helping real people.

SEC Obtains Court Order Halting Cryptocurrency Bank

By Ben Dell’Orto, Spring 2018 IAC Student Intern

Whether you’re slightly confused as to what Bitcoin is, or are kicking yourself for forgetting the password to your “Bitcoin Wallet,” cryptocurrencies are a popular subject lately. Two alleged fraudsters in Dallas, Texas thought they could capitalize on this popularity—and people’s lack of expertise on the subject—in creating an alleged scam Initial Coin Offering (ICO).

According to the SEC, Jared Rice Sr. and Stanley Ford founded AriseBank, which they claimed was a new type of “decentralized” bank, which offered investors “banking products and services using more than 700 virtual currencies” such as Bitcoin, Bitshares and Dogecoin. The pair allegedly claimed that the funds were raised through an algorithm that automatically traded in the cryptocurrencies. AriseBank also allegedly told customers that it had bought an FDIC-Insured bank which allowed it to provide “customers the ability to obtain an AriseBank-branded VISA card to spend any of the 700-plus cryptocurrencies.” Continue reading

Why Should you Diversify? Ask the Three Little Pigs.

Diversification is an important investing topic. While every investor has different circumstances and should obtain advice before investing, take the time to understand diversification and how it can impact your account.  Join our little friends, the three pigs, as they tackle diversification and build an investment strategy suitable for them that survives some serious huffing and puffing.

Beat Them at Their Own Game

By Abigail Howd, Spring 2018 IAC Student Intern

FINRA says that Americans lose $50 billion a year due to investment fraud. You would probably like to think you could see through a con artist’s scam, and now, you can put that theory to the test without any risk to your bank account. The FINRA Investor Education Foundation created an online game, Con ‘Em If You Can, where you can try your hand at besting the best fraudsters in town, the town of Shady Acres, that is.

In the game, your goal is to accumulate wealth and strength while avoiding capture by the Fraud Fighting Agency’s ruthless agents. The game first provides you with the “Fraud Tools” that you will need to succeed. Each of these fraud tools is a persuasion technique commonly used by fraudsters: Continue reading

Wednesday’s Word: Boiler Room

By Ben Dell’Orto, Spring 2018 IAC Student Intern

In addition to inspiring a Hollywood movie, Boiler Rooms are a common scheme to pressure investors into purchasing an investment that most likely is not a good one for them. The scheme involves a large group of “salesmen” trying to attract as many investors as possible to the scam. The most common method is through cold calling, where the schemers use high-pressure sales tactics to encourage the potential investor on the other end of the phone call to take advantage of an investment that will yield “high returns” and “no risk” but is only available for a short time. FINRA notes that the caller will often attempt to explain the miracle investment by suggesting that it is founded in an emerging industry or will “play off recent events” to lend legitimacy to the lie. One recently-busted scam in England took advantage of the rising wine industry, and this blog reported on a recent FINRA report of scams increasing on this side of the pond.

While previously usually conducted over the phone, the SEC adds that boiler rooms now may use “emails, text messages, social media, and other means.” These methods lack the pressure created by a persuasive voice speaking directly over the phone, but can still be effective by suggesting that the time to buy is limited, or by pestering with frequent messages.

The most important thing to remember to avoid falling victim to a Boiler Room scheme is to




The fraudsters behind this kind of scheme are relying on a quick decision, so taking a moment to run a broker check and an internet search of the investment before buying will save you from taking a big loss.

Dangerous Clickbait: The SEC Warns Investors About Paid-to-Click Scams

By: Esmat Hanano, IAC Student Intern Spring 2018

At the tail-end of last year, the Securities and Exchange Commission (SEC) issued a warning to investors about Paid-To-Click (PTC) scams. PTC websites “…promise investors a share of the program’s profits in exchange for paying an upfront fee or buying products.” The PTC site might even promise the investor advertising space on its network of ads in addition to a share in the program’s profits. In this way PTC sites seem to offer the best way of making money on the internet—buy online “ad packs” then sit back and watch as your profits roll in! However, the SEC warns that these websites are being used to further Ponzi schemes. In fraudulent schemes, a new investor will place money in a PTC program which will then be sent to previous investors in the same program as their “profits.” Not all PTC sites are malicious, but investors thinking about buying into such programs must be wary of the promises these websites make. Continue reading

Investor Alert: Promissory Notes Don’t Offer Much Promise

Ben Dell’Orto, Spring 2018 IAC Student Intern

When the North American Securities Administrators Association (NASAA) polled state securities regulators on the “top five current investment practices, products or schemes” leading to a customer complaint or investigation, the results were overwhelming: 74% of those surveyed listed promissory notes among the top five.

So what is a promissory note? On the surface, the concept is simple; companies in need of capital reach out to investors to lend them some money with the promise of eventually returning the initial investment along with fixed interest payments. The length of time the company has to repay can vary from months to years.

Though this sounds like a simple process with potential for high returns, most of us are unlikely to get an offer to purchase legitimate promissory notes. The NASAA notes that “legitimate promissory notes are marketed and sold almost exclusively to sophisticated or corporate investors with the resources to research the companies issuing the notes and to determine whether the issuers have the capacity to pay the promised interest and principal.” This means that most offers the average investor receives for promissory notes are actually fraudulent.

While FINRA notes that fraudsters offering promissory notes most frequently target elderly investors with fixed income for their retirement savings, anyone is at risk. This brochure, produced by FINRA, the NASAA and others describes instances where a coffee company sold $4 million in notes to at least 100 investors and a veterinarian in Kansas sold $1.3 million in notes to friends and church members. In both situations, the investors lost everything. Last April, an insurance agent plead guilty to defrauding almost eighty of his clients out of $8.2 million by promising a 10 percent return to borrow against their life insurance plan.

The key to avoiding fraudulent promissory notes is the same as avoiding most scams: research. Use the SEC’s EDGAR search tool to make sure your promissory note is properly registered. Also avoid any notes which claim to be “guaranteed,” as nothing is.