Published October 8, 2001, Pawtucket Times
With the news of the latest Federal Reserve rate cuts, stocks soared with investors showing new optimism in the stock market. The Dow Jones industrial average has spiraled up above 9,000 for the first time since the horrific terrorist attack more than three weeks ago. With this latest rally on Wall Street, elderly investors might be more easily influenced by scam artists to invest their hard-earned income in buying stocks, bonds, and other securities.
According to the state’s Securities Division of the Department of Business Regulation (DBR), charged with investigating financial scams, its staff has examined hundreds of complaints filed against stockbrokers and investment advisors.
Some complaints can be resolved quickly, others are more complicated to tackle and take more time to resolve,states David Briden, DBR’s chief securities examiner. For instance last April DBR entered a consent order against Alpha Telecom, Inc. and ATC, Inc.
These two companies promoted the sale of pay telephone investments to Rhode Island residents. State regulators noted that the high risks of this investment were not fully disclosed to the 50 Rhode Islanders, some of them elderly, who had invested approximately $960,000. Under the terms of the order the two companies paid a penalty of $50,000 to the state. This represented the largest administrative penalty in a pay telephone case nationwide.
Additionally, Alpha Telecom, Inc. and ATC, Inc. were ordered to offer a full refund to the Rhode Island investors. DBR went to Superior Court to enforce the terms of the consent order.
In August 2001 the U.S. Securities and Exchange Commission announced that the U.S. District Court of Oregon granted a temporary restraining order and froze the assets of the two companies. Meanwhile, in that month these companies had filed for bankruptcy in the U.S. District Court for the Southern District of Florida. At press time, the investors are still waiting for their money to be returned.
So how can you protect yourself against financial scams? Don’t get reeled in by a “cold call,” touting an investment that is guaranteed to make you lots of money, warns Briden. Especially if you have never dealt with the caller, “simply tell them you are not interested and hang up,” he says.
“Always get written information before making any investment decision,” Briden says. Even meet with the broker at his or her office so you get to know them and to see the firm, he suggests.
There’s a problem if the caller can’t produce written material. According to Briden, the old adage there is no free lunch really applies to making investments, too. Don’t be conned into making a quick investment decision when high pressure sales tactics are used, Briden says, adding that any investor should “Beware of any promise made that the investment will result in quick profits or extremely high returns. Be concerned if your told ‘Act on it now or it will be too late,” he says.
Meanwhile, a check can be a receipt of your investment. “Never invest cash,” Briden adds, stressing that a person should never send a check to someone at a firm you know nothing about.
Become an educated investor when considering the investment of your money. “It is important that you understand the costs (commissions, fees and penalties) to the investment,” Briden says. “Always find out the risk involved in your investment. Never make an assumption that the investment is federally insured or guaranteed.”
If you suspect that you have been a victim of investment fraud, contact the State of Rhode island, Department of Business Regulation Securities Division, Suite 232, 233 Richmond Street, Providence, RI 02903, or call (401) 222-3048.
Herb Weiss is a Pawtucket-based freelance writer who writes about aging, health care and medical issues.