NFA Investor Newsletter
January 24, 2013
|In this Issue:||Conducting Due Diligence
||Online Investment Fraud
||National Consumer Protection Week
||BBB Smart Investing
||Traders Expo||Recent Enforcement Actions|
People always say it could never happen to them. They say that the person they trusted was so nice, and seemed so professional. They say that they just can't believe that someone would take advantage of their relationship. This is the typical story told by victims of affinity fraud. And it's a familiar refrain recently, as reports continue to crop up from across the country about how yet another Ponzi scheme bilked innocent investors out of millions.
Earlier this month, a pair of stories made headlines in Arizona and Connecticut where fraudulent commodity pool operators and advisors were apprehended by authorities after years of conning unsuspecting investors.
The Republic published a story in early January about how Phoenix-based Ray Thomas Brown created a phony, unregistered trading firm and allegedly stole at least $1.2 million dollars from 60 investors located across the country. Brown, an ex-con masquerading as a wealthy retired banker with a long history of commodities trading success, operated his own firm, Ray Brown & Associates, from which he solicited investors to his Equity-Plus Commodity Group Trading Program by promising guaranteed 100 percent monthly returns.
According to federal investigators, Brown reportedly tempted investors with detailed summaries indicated he had made millions in prior investments, and sent them to Internet sites that supposedly supported his trading acumen. Brown also built up his customers' confidence by consulting with them via Skype, an Internet video chat service, and further ingratiated himself by cultivating personal relationships.
"I never met a smoother operator," one of Brown's victims, Ricky Johnson, told The Republic. "This man told me he loved me. Literally. He told me I was the nicest, kindest man he'd ever known. ... He took me for almost everything I had in savings; $70,500." In December, a federal court froze Brown's accounts, seized his computers and prohibited him from engaging in any investment activity.
Similarly, Connecticut state and federal authorities recently released further details about another fraudster, Feisal Sharif, who was arrested last September after stealing $5.4 million from as many as 80 investors. Investigators claim Sharif and his company, First Financial, ran a Ponzi scheme between 2007 and 2012 that involved equities futures, a Times Union article reported. Sharif purportedly promised investors returns of 1 percent to 15 percent on their investments per month.
The majority of Sharif's investors, according to the Connecticut Department of Banking, were people he met through religious activities and fellow Habitat for Humanity members.
Like Brown, Sharif was not registered to sell or provide advice to commodity pool investors.
In both cases, investors could have realized that the people and firms with whom they were investing were suspect by conducting a background check to find whether they were registered with the Commodity Futures Trading Commission and were an NFA Member.
NFA makes it simple for investors to conduct background checks on futures commission merchants, introducing brokers, commodity pool operators, commodity trading advisers, forex dealer members and others on its Background Affiliation Status Information Center (BASIC) service. Available free of charge, investors are urged to do a thorough examination of the principals and firms with which they are considering doing business before giving them any money.
5 tips for avoiding online investment fraud
The Securities and Exchange Commission (SEC) recently issued an investor alert intended to educate investors about fraudulent online investment schemes that may involve social media. Social media sites, such as Facebook, YouTube, Twitter, LinkedIn and other online networks, have started to become de rigueur for U.S. retail investors to find investment information. However, while social media can provide a wealth of information and easily put investors in contact with legitimate investment experts, it also is an anonymous forum for fraudsters.
The Internet and social media offer scammers a convenient means of reaching scores of potential targets with relative ease. It's simple for scammers to create websites and social media accounts, and send email and direct messages that both look and feel authentic, all of which increase their odds of convincing investors to send them money. As a result, investors should exercise caution when using social media to consider investments.
The SEC offers the following suggestions for investors to keep in mind when faced with online investment information:
NCPW's website offers consumers a significant amount of information on a number of topics, including banking, credit cards, investing, scams and technology, to name a few. The new website also contains detailed information about NCPW's partner agencies, which are comprised of government agencies, advocacy organizations and private sector groups from across the nation, and offers resources for people and organizations to get involved in the program. NFA is proud to participate again as a steering committee partner of NCPW.
The site also boasts a blog featuring regular posts from NCPW partners. Many of the blogs provide information intended to assist consumers with a variety of topics, including privacy protection, money and debt management, and recognizing identity theft, frauds and scams. NFA recently published a blog post on the NCPW site, entitled "Promoting due diligence: NFA offers more tools for investors to conduct background checks," that details recent enhancements to our Background Affiliation Status Information Center.
National Consumer Protection Week will take place March 3 through March 9. Visit the website for more details about NCPW events. And continue to check the website throughout the year for the latest consumer protection and education information.
Better Business Bureau, FINRA Foundation launch smart investing website
In an effort to help quash investment scams, the Better Business Bureau (BBB) and the FINRA Investor Education Foundation last month launched a new consumer website. The site, BBB Smart Investing, is intended to help educate investors on how to make more intelligent investing decisions and avoid fraud, risky investments and unlicensed brokers.
BBB and FINRA Foundation have collaborated in the hopes of combating the rising concern over financial fraud across North America. And their timing couldn't be better. The Federal Trade Commission and Canadian Anti-Fraud Centre reported that consumers lost more than $1.5 billion to scams in 2011. Additionally, FINRA Foundation research indicates that investors are overconfident about their financial management skills-especially baby boomers, who are most often the target of investment scams.
"Our partnership with BBB will help Americans in communities across the country protect their savings from fraudsters," FINRA Foundation President Gerri Walsh said in a release. "The FINRA Foundation's 'Outsmarting Investment Fraud' curriculum and resources have been field-tested, and give consumers the tools and information they need to thwart fraudsters touting investment scams."
The new website offers a number of resources for investors related to smart investing. The site provides lists of helpful tips for investors to take control of their finances, understand their account statements and trade confirmations, as well as suggestions on how to head off potential problems with brokers. It also lists suggestions for how to sniff out fraud and conduct checks of investments and investment professionals. BBB Smart Investing also contains a calendar of BBB- and FINRA-hosted events, tools that investors may find useful, as well as links to additional educational videos and literature.
NFA to attend Traders Expo in New York
The Traders Expo New York will be held at the Marriott Marquis Hotel in New York from February 17 to 19. 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 set up in the exhibit hall at booth 6106. Attendees are welcome to stop by to talk with members of the compliance staff, ask questions and pick up information materials.
For complimentary registration to The Traders Expo New York, call (800) 970-4355, or visit the Expo's website.
Recent Enforcement Actions
In the fourth quarter of 2012, NFA's Business Conduct Committee 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.
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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