Ponzi Schemes and Investment Fraud: A Year Later
Upcoming SlideShare
Loading in...5
×
 

Ponzi Schemes and Investment Fraud: A Year Later

on

  • 4,499 views

Presentation to the Palm Beach Chamber of Commerce on November 5th 2009 regarding spotting financial fraud and ponzi schemes in investment accounts by securities attorneys.

Presentation to the Palm Beach Chamber of Commerce on November 5th 2009 regarding spotting financial fraud and ponzi schemes in investment accounts by securities attorneys.

Statistics

Views

Total Views
4,499
Views on SlideShare
4,167
Embed Views
332

Actions

Likes
0
Downloads
30
Comments
0

3 Embeds 332

http://www.steinsteinlaw.com 211
http://steinsteinlaw.com 114
http://www.slideshare.net 7

Accessibility

Upload Details

Uploaded via as Microsoft PowerPoint

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

Ponzi Schemes and Investment Fraud: A Year Later Ponzi Schemes and Investment Fraud: A Year Later Presentation Transcript

  • Ponzi Schemes and Investment Fraud:A Year Later
    Presented by: Craig D. Stein
    205 Worth Avenue, Suite 203
    Palm Beach, FL 33480
    Tel.: (561) 659-8802
  • We Will Discuss Two Types of Frauds
    Affinity Fraud
    General Brokerage / Investment Fraud
  • Affinity Fraud / Ponzi Schemes
    A. What is Affinity Fraud / How does it work?
    Nature has ingrained:
  • Affinity Fraud / Ponzi Schemes
    A. What is Affinity Fraud / How does it work?
    Political / Economic
    Social / Achievement
    Interests
    Religion
  • Affinity Fraud / Ponzi Schemes
    A. What is Affinity Fraud / How does it work?
    Those you trust the most can do the most damage
  • Affinity Fraud / Ponzi Schemes
    B. Affinity Fraud in the Past: “Jack and the Beanstalk”
  • Affinity Fraud / Ponzi Schemes
    C. Affinity Fraud in the Present:On Guard, But What do You Look For?
  • Affinity Fraud / Ponzi Schemes
    C. Affinity Fraud in the Present:On Guard, But What do You Look For?
    Private Rather than Public Investment
    Unusual or Complicated-Sounding Investments
    Promise and History of High Returns
    Short Term for High Returns
  • Affinity Fraud / Ponzi Schemes
    C. Affinity Fraud in the Present:On Guard, But What do You Look For?
    Continuous Stream of Returns (Despite Market Volatility)
    Open Ended:
    Opportunity for Continued Reinvestment
    Open to New Investors Even if it does not Appear So.
  • Affinity Fraud / Ponzi Schemes
    C. Affinity Fraud in the Present:On Guard, But What do You Look For?
    Seeking out Referrals
    Little or No Oversight
    Where are Funds Directed?
    Paper Statement from independent 3rd Party
    You Should Not be Made to Feel Uncomfortable to Question the Investment
  • Affinity Fraud / Ponzi Schemes
    If It’s Too Good to Be True, It Probably Is:
  • Affinity Fraud / Ponzi Schemes
    If It’s Too Good to Be True, It Probably Is:
    It is Subjective Like Other Platitudes – People Do Not Follow:
    Don’t Judge a Book by Its Cover
    An Apple a Day Keeps the Doctor Away
  • Affinity Fraud / Ponzi Schemes
    If It’s Too Good to Be True, It Probably Is:
    People Seek What is Too Good to Be True
  • Affinity Fraud / Ponzi Schemes
    If It’s Too Good to Be True, It Probably Is:
    The More Financially “Successful” in Society have Already Achieved what’s “too good to be true,” usually by taking risks.
    Seek guidance from 3rd Party to determine if an investment is “too good to be true”
  • Economic & Financial Industry Fraud & Negligence
    A. In the Past: They are regulated, So Why Do I Have to Do Anything?
  • Economic & Financial Industry Fraud & Negligence
    B. In the Present:
    Tell Me What to Look For!
    ??
  • Economic & Financial Industry Fraud & Negligence
    B. In the Present:
    Tell Me What to Look For!
    Just Because Your Investments Lost Money Does Not Mean that Anyone Acted Inappropriately
    Also, the Inverse – Just Because There Are Profits in Your Account, Does Not Mean You Are Suitably Invested
  • Economic & Financial Industry Fraud & Negligence
    B. In the Present:
    Tell Me What to Look For!
    Insidious: Because they may Only Partially Dilute or Reduce Your Investments
  • Economic & Financial Industry Fraud & Negligence
    B. In the Present:
    Tell Me What to Look For!
    Often Hidden by Market Appreciation and Excused by Market Depreciation
  • Economic & Financial Industry Fraud & Negligence
    B. In the Present:
    Tell Me What to Look For!
    These often Occur in Brokerage Accounts, even with Investment Advisors and Even in Trust Accounts
  • These Occur in Brokerage Accounts, with Investment Advisors and Even in Trust Accounts
    Sale and Recommendation of Unsuitable Investments
    Client Objectives
    Risk Tolerances
    Types of Investments
    Sophistication Does Not = Wealth
  • Diversification and Over-Concentration
    Individual Stocks
    Individual Sectors
    Types of Investments (Equities, Debt)
    Hedging
  • Churning
    Excessive Trading
    Who Controls Account
    Looper Formula
  • Unauthorized Trades
    Discretion Authority
    Time and Price
  • Misrepresentation and Omissions
    Why Would Broker Make Misrepresentations?
    • Commissions
    • Reliance Upon the Information Provided by the Brokerage Firm (ARS, LPS)
    • Belief in Investment - Projection
  • Sharing Profits or Selling Away
  • Government / Regulation
    A. In the Past: Act Upon What They Know - Reactive
    Government Issued Blinders
  • Government / Regulation
    A. In the Present: Despite Good Intentions,Still Act Upon What They Know - Reactive
    Still Using Government Issued Blinders
  • Government / Regulation
    B. In the Present: Still Act Upon What They Know - Reactive
    Increase Scrutiny Upon Those We Already Regulate
    Review Old Case Files
    They Still Cannot Know What They Do Not Know
  • If You Are Concerned About an Affinity Fraud…
    A. Seek Advice of Another Independent and Competent Investment Professional
  • If You Are Concerned About an Affinity Fraud…
    B. Refer to Industry Regulators – Tell Them What They Do Not Know (SEC, FINRA, State, etc.)
  • Closing Remarks
    A. Each of You are Individuals With Different Investment Objectives and Risk Tolerances
  • Closing Remarks
    B. Ask Your Financial Advisors; And Just As Important: LISTEN to Their Answers
    Why is This Investment Suitable for Me?
    How Much Can I Lose?
    Am I Adequately Diversified?
  • Closing Remarks
    B. Ask Your Financial Advisors; And Just As Important: LISTEN to Their Answers
    Are You Recommending This For Other / All of Your Clients?
    What is Your Understanding of My Objectives and Risk Tolerances?
  • Closing Remarks
    B. Ask Your Financial Advisors; And Just As Important: LISTEN to Their Answers
    Carefully Review your Opening Account Documentation. Do not just sign a stack of documents.
    Read and Understand Your Account Statements: Ask 1) Broker, 2) Branch Manager, 3) Different Advisor
  • Closing Remarks
    C. With Financial Fraud, It is ALWAYS a Year Later