Duck from Deception: Find the Fake News Before it Finds Your Wallet

By Qudsia Shafiq, Fall 2017 IAC Student Intern

Are you smarter than the ads you see? While you may think you can outsmart any ad, have you considered the possibility that you may not know an ad when you see one?

Think about where you turn to for investment advice: Is it from individuals (such as your financial adviser, friends, and relatives), traditional news sources (like television shows, radio stations, newspapers or magazines), or is it from the internet on your personal computer, tablet or smartphone? For most individuals, it’s usually a combination of these sources. But one thing these categories have in common is that they are platforms for product placement and advertisements. Continue reading

Legal News – Affinity Fraud: Wolves in Sheep’s Clothing

By Abigail Warren, Fall 2017 IAC Student Intern

Earlier this year, the SEC  announced fraud charges against a Michigan pastor.  The pastor, and owner of a real estate company, allegedly targeted members of his congregation, along with laid off auto workers, promising to roll their money into IRAs and invest in his company.  The pastor allegedly collected 6.7 million from over 80 investors, even though he was not registered to sell securities, guaranteeing high returns and inflating the value of his real estate company. The SEC says he allegedly invested none of the 6.7 million, scamming groups in his community who entrusted their money to him.

Unfortunately, these allegations sound like affinity fraud, an all too common issue.   In affinity fraud, fraudsters prey on groups, such as religious organizations, the elderly, immigrants, retirees, and ethnic groups.  Often, they are a group member or they use a trusted member to recruit potential investors, the scam even unbeknownst to the friend “spreading the word.”  Affinity fraud is also gaining online presence, with fraudsters using social media sites to target online groups.  According to the SEC, most affinity fraud surfaces as Ponzi or pyramid schemes, soliciting fake investments for personal use.  Due to the nature of these “affinity” scams, the damaged often investors opt out of reporting the fraudster, preferring to handle it within the group.

Among affinity fraud’s characteristics, the SEC warns investors to look for “red flags” such as “spectacular or guaranteed returns.”  For tips on how to avoid affinity fraud visit the SEC and FINRA.

If you suspect affinity fraud contact the SEC or your state regulator.

Veterans: You Protected Our Nation, Now Protect Your Assets

Law IACby La’ Nise Harrington, Spring 2017 Student Intern

Unfortunately, our nation’s protectors are at times the very people who are targeted for scams. The scams are usually one of two types: those that offer special treatment for veterans and those that prey on unique veteran characteristics. Here, are the seven most common veteran scams as identified by Scambusters.org:

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Ransomware: How to Avoid Becoming a Victim

By Becky Clapes, guest blogger

While anyone with a computer is at risk for a ransomware attack, any business that has customer information stored is especially vulnerable. It can cost a business a lot of money and can even shut down a business completely. It can also harm customer security.

Here are a few simple ways the FTC has suggested to defend against ransomware: 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.

Protecting Senior Investors: Delaying Disbursements from Client Accounts

By Michael Williford, Fall 2016 Student Intern

There was a highly respected journalist in the 1920’s and 30’s by the name of H.L. Mencken.  Mr. Mencken attacked shams and con artists. One of his better known quotes goes something like this: “When somebody says it’s not about the money, it’s about the money.” And so it is with those that take financial advantage of the elderly. They may present as eager caretakers or they may be selling an “opportunity,” but it’s always about separating elderly, vulnerable investors from their hard-earned money. As a result, NASAA proposes that brokers implement mechanisms for delaying disbursements of senior citizen’s investment accounts where there is a reasonable basis to believe the investor has been financially exploited.

Make no mistake, such delays are an extreme proposal, but they are also a potentially powerful tool in short-circuiting the plans of con artists set on exploiting the elderly. NASAA recommends that firms institute mechanisms to permit delaying disbursements that could be the result of exploitation. Mechanisms that will allow a firm to delay a financial disbursement must meet certain criteria, however. The criteria are driven by state law and regulations that require an investigation to continue after a disbursement is delayed, and NASAA strongly recommends that firms develop internal policies and procedures that comply with the Model Act, so that any disbursement delays are above board and are the result of thorough and complete investigations into the circumstances surrounding the requested disbursement such that firms do not unnecessarily delay legitimate disbursements. Doing so could have negative consequences for the firm if the disbursement is a time sensitive, legitimate move of an elderly investor’s assets that is being done at the informed direction of the account holder. Understandably, firms want to avoid the legal problems that could result from the irresponsible delay of a legitimate disbursement, and NASAA agrees that a robust and thorough training program is required to avoid unnecessarily complicating the procedure, but NASAA has taken the step of recommending the tactic because the exploitation of senior investors is a serious problem with large financial consequences for a vulnerable segment of the population. Clear communication for the nature of any delay is required, and NASAA suggests the program be communicated up front to investors, and not in the fine print of account opening documents. Firms would do well to integrate NASAA’s recommendations as part of a broader effort to protect senior investors, but as always, transparency is key to maintaining clients’ trust.

Protecting Senior Investors: Detecting Senior Financial Exploitation

By Michael Williford, Fall 2016 Student Intern

NASAA recommends that brokerages develop policies and procedures designed to detect the financial exploitation of seniors, in addition to simply identifying older, potentially at-risk investors. Among the signs that should help brokers identify at risk investors who may be actively being exploited, NASAA recommends brokers watch for specific behaviors that indicate an elderly investor is being taken advantage of; these behaviors may trigger reporting obligations under existing state laws and the NASAA Model Act, where it has been adopted.

The signs of exploitation that NASAA identified in its discussions with securities industry experts, advocates for the elderly, and adult protective services professionals include unusual and repeated cash withdrawals or wire transfers—this could be a sign that an investor has fallen prey to boiler room type scam, which we’ve discussed before on this blog.  In addition, the sudden appearance of new and unknown friends, business associates, or even relatives should also be viewed with a skeptical eye. Nervousness or anxiety when conducting telephonic financial transactions or when visiting a financial services office are also suspicious behavior that may indicate a pattern of exploitation. Having little or no knowledge about their own financial status can be a sign that an elderly investor is no longer in control of his or her finances. If a person interferes when you try to speak to a loved one about your loved one’s financial status, it could be a sign that the individual is being exploited, as are sudden changes in important legal and financial documents such as powers of attorney, account beneficiaries, wills, or trusts; as are unexplained or unusual windfalls accompanied by a reluctance to discuss the details. We all have some sense of what normal financial activity looks like for the elderly investors in our lives. If you see a large departure from that behavior in combination with any or all of the factors outlined above, talk to your state’s human services department. There are almost always divisions of regulators devoted to helping protect seniors from the kind of exploitation at issue here.