NFA Investor Newsletter
|January 27, 2014
In this Issue:
|The Top 10 scam trends of 2013||Beware Scams Masquerading as Multi-level Marketing Programs||Securities Investor Protection Corporation launches its new website||Visit NFA at Traders Expo New York||Recent enforcement actions|
It's a new year, so you know what that means: It's time to look back at the highlights of the previous year in the form of a year-end top "something" list. However, this isn't like a favorite films, or best restaurants list—it's a much more sobering look at latest trends in how consumers have fallen victim to fraudulent attacks on their money or personal information in 2013.
The National Consumers League (NCL) recently issued a report on the top 10 scam trends reported last year, based on reports to its Fraud.org website. According to NCL, in 2013, scammers approached consumers most frequently over the telephone as opposed to via email or websites—with more than 36 percent of complaints to Fraud.org noting that the phone was the initial method of contact, up from just over 25 percent of complaints in 2012.
Consumers should keep an eye out "refund and recovery" fraud, which, according to NCL, was the fastest-growing scam in 2013. Refund and recovery fraudsters typically pitch prospective victims through phone calls or direct mail, and claim that they can recover the victims' lost money. However, consumers typically can discern this type of fraud by the fee that prospective victims need to pay to recover their lost funds.
NCL listed the following as the top scams reported in 2013:
As we reported in the last Investor Newsletter, NFA had a personal look at a phishing scam related to a former Member. Last October, fraudsters solicited customers and creditors of Peregrine Financial Group (PFG) who currently are awaiting the resolution of their claims by the U.S. Bankruptcy Court. So beware of the potential scams that are out there. Always exercise caution and do your due diligence before giving anyone your money or personal information.
The Securities and Exchange Commission (SEC) recently issued an investor alert intended to educate investors about pyramid schemes posing as multi-level marketing programs. Frequently in the news, pyramid schemes, which are akin to Ponzi schemes, are predicated on partaking in a fraudulent program in which the participants profit almost exclusively through recruiting other people to join.
Similarly, you've also probably come across a multi-level marketing program (MLM) before. MLM programs typically pay you for products or services that you and the additional participants whom you recruit (and their recruits, and so on) sell to others. But while some MLM programs are legitimate, others invariably are actually pyramid schemes in disguise.
Pyramid schemes masquerading as MLM programs often violate the federal securities laws, including laws prohibiting fraud. In a pyramid scheme, money from new participants is used to pay recruiting commissions (that may take any form, including futures or securities) to earlier participants just like how, in classic Ponzi schemes, money from new investors is used to pay false profits to earlier investors.
The SEC suggests that you bear the following common pyramid scheme traits in mind when considering joining a MLM program:
For other tips on how to avoid investment fraud, check out NFA's Scams and Swindles brochure.
Securities investors now have some additional tools and information at their fingertips. On January 16, the Securities Investor Protection Corporation (SIPC) unveiled its newly redesigned website.
For those of you unfamiliar with SIPC, it's a non-profit member corporation that oversees the liquidation of member broker-dealers that close when the broker-dealer is bankrupt or in financial trouble. Should monetary issues occur, SIPC and a court-appointed trustee step in to return the broker-dealer's customers’ securities and cash—protecting each customer up to $500,000 for securities and cash, within certain limits.
The redesigned website now features a number of new sections designed to assist the investing public in understanding more about the organization, its mission and how its claims process works. For people involved in liquidation proceedings, SIPC's enhanced site includes graphical representations of case deadlines as well as additional case data. The site also contains a new search engine that not only allows users to search the entire site, but also delivers more targeted, relevant results and content.
"Our new site makes this information even more accessible and easy to understand not just for investors but also for our members, other financial services professionals and legislators," said SIPC President Stephen Harbeck. "It was developed with feedback from a variety of audiences and we hope to continue the dialogue to ensure the site continues to best meet the needs of all users."
Additionally, the website has been optimized to provide greater accessibility and improve on-screen formatting on mobile devices and tablets.
Last fall, NFA, in conjunction with CME Group, Futures Industry Association and the Institute for Financial Markets, commissioned Compass Lexecon, an independent economic consulting firm, to study the economic feasibility of adopting an insurance regime for the U.S. futures industry similar to what SIPC provides for the securities industry. The study examined various models for providing customer asset protection insurance and developed quantitative estimates for the potential costs of two models in particular.
Click here to learn more about the study's findings.
If you're local or just looking for an excuse to visit the Big Apple, you can visit NFA at the 2014 International Traders Expo at Marriott Marquis Hotel in New York City from February 16 to 18. The Traders Expo offers traders an opportunity to meet face-to-face with, learn from and ask specific questions of a long list of trading experts.
NFA will be located at booth exhibit hall at booth #6106.
Attendees are welcome to stop by, ask questions and pick up informational materials at both conferences.
For complimentary registration to The International Traders Expo New York, click here or call 800.970.4355.
In the fourth quarter of 2013, NFA issued Decisions, Member Responsibility Actions, Final Orders in Registration Cases and Complaints against the following NFA Member firms and individuals. Click on the name for more detailed information.
Decisions in Disciplinary Cases
Let us know what you think about this newsletter
You can check the registration status and disciplinary history of any futures firm or individual.
You can file a complaint online. Be sure to include as much information as you can.
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