Additional Archives
Securities Division Newsletters
December 2010
In this issue we discuss the risks associated with an emerging online financial service known as peer-to-peer, or P2P, lending. We also provide tips for "rebalancing" one's portfolio as the New Year approaches. We highlight the third round of IA compliance workshops that were held in Cary, NC, and we provide the SEC's timetable for releasing studies or proposed rules as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
November 2010
In this issue, we feature the latest developments in three criminal cases that the Securities Division is following. The first involves the November 17, 2010, arrest of Walter Ray Reinhardt in Durham, NC, on 62 felony counts. Division investigators allege that, between November of 2005 until May of 2009, Reinhardt convinced his victims, many of whom were retired school teachers, to invest their retirement money with him without disclosing to these investors that the National Association of Securities Dealers (NASD) had barred him from selling securities in 2001, and that the Securities Division had issued a cease and desist order against him in 2007 for unregistered sale of securities. He is currently being held in the Durham County Jail under a $10 million bond. In another case, Tyrone William "Cauzae" McCall, already serving a 60- to 81-month sentence for securities violations in Union County, pleaded guilty on November 17, 2010, to three felony counts of securities fraud in Mecklenburg County Superior Court. He received two 10-12 month active sentences and one 8-10 month active sentence after pleading guilty on three counts of Class H felony securities fraud. In the third case, Gregory Bartko, a securities attorney from Atlanta, GA, was convicted on November 18, 2010, in U.S. District Court in Raleigh on one count of conspiracy to commit mail fraud, the sale of unregistered securities and money laundering, four counts of mail fraud and one count of the sale of unregistered securities. He faces a maximum of ninety years imprisonment on these charges. The Securities Division also announces its participation in the Elder Investment Fraud and Financial Exploitation Prevention Program (EIFFE) that will work with medical professionals in North Carolina to detect investment fraud aimed at senior citizens. We also report on the second round of compliance workshops for state-registered investment advisers and their representatives. The Securities Division is also taking part in the Women in Transition (WIT) program, a new initiative that will address the unique challenges that women face with managing their money as they transition through their lives. Finally, we reprint the findings of a new survey conducted by the Financial Industry Regulatory Authority (FINRA) revealing that debt is a major concern for military families.
October 2010
In this issue, the Securities Division urges investors to be mindful of the risks associated with investing in gold. We include an article written by David Massey, President of the North American Securities Administrators Association and Director of the North Carolina Securities Division, concerning changes that have been made to Part 2 of Form ADV. This form is used by investment advisers during the registration process and for making required disclosures about their business activities. We also reprint an investor alert originally published by the Financial Industry Regulatory Authority (FINRA) concerning high-yield investment programs (HYIPs). We also include the usual Calendar of Upcoming Events, cases that are On The Docket and various announcements from other federal regulators.
September 2010
In this issue we report on the appointment of David S. Massey, NC Deputy Securities Administrator, as the 2010-11 president of the North American Securities Administrators Association (NASAA), the oldest international investor protection organization. We also report on the first of a planned series of compliance workshops for NC-registered investment advisers and investment adviser representatives that was held in Asheville, NC. The second workshop is planned for November 1st and 2nd in Charlotte. Click the link above for registration details. We also reprint a NASAA news release concerning the study by the federal Securities and Exchange Commission (SEC) into the differing standards of care owed to retail investors by investment advisers and broker-dealers when offering investment advice. We also reprint an SEC investor bulletin advising investors to be aware of risks when trading in stock after the SEC has suspended trading in the shares. In addition to including our latest calendar of upcoming investor education events and docket information, we include notices about some upcoming events, including a presentation sponsored by the North Carolina Council on Economic Education featuring Ms. Lori Schock, Director of the SEC's Office of Investor Education and Advocacy, and a video replay of a segment of a Continuing Legal Education (CLE) program the Securities Division sponsored in May 2009 entitled, Representing Investors: An Introduction to Securities Arbitration. This video replay is being conducted by the NC Bar Association. Click the link above for registration information.
August 2010
In this issue, Secretary of State Elaine Marshall identifies the Top Investor Traps of 2010, the Securities Division announces the first of a series of compliance workshops for state-registered investment advisers, and we provide a preview of three new investor education resources that we are making available to investors: "Affinity Fraud", "Baby Boomers Beware", and an information sheet about the Securities Division and ways investors can protect themselves from potential fraud. As always, we provide a calendar of upcoming events. Also included is a joint statement issued by the Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA) and North American Securities Administrators Association (NASAA) that outlines practices being used by financial services firms to strengthen their policies and procedures for serving senior investors as they approach and begin retirement. We include a link to an investment fraud awareness quiz to test your susceptibility to investment fraud, and we provide important information from the federal regulators.
July 2010
In this issue, we highlight the important investor protection provisions contained in the Dodd-Frank Wall Street Reform Act which President Obama signed into law on July 21, 2010. Also, in late-June, the North American Securities Administrators Association (NASAA) announced the launch of an enhancement to the Investment Adviser Public Disclosure (IAPD) website that allows investors to access information electronically on more than 220,000 individuals who work for money management, financial planning and other investment advisory firms. The information will include the person's background information such as customer complaints, criminal or regulatory disclosures, professional qualifications, and employment history. Click the link above to read this article and find out where you can go to get this information about your investment professional. We also include an announcement from the Internal Revenue Service (IRS) about changes that have been made to Form SS-4, Application for Employer Identification Number (EIN), to clearly identify the applicant's true owner. Representatives of the Securities Division also paid multiple visits to BizCamp, a week-long day camp offered by Junior Achievement of Central Carolinas, Inc., for students ages 10-14. Students create their own businesses, invent new products and run their simulated city for 5 days as they hone skills in math, communications, analytical thinking, teamwork, citizenship, business ethics and personal finance. This year's camping experience included a surprise: an investment scheme! Follow the link above to find out what made students give up approximately 12% of their gross "pay." In addition to our Calendar of Upcoming Events and the On The Docket sections, we also feature an essay by a high school student who interned in the Securities Division. We asked her to provide her perspective on money and finances. Finally, we include a report on some of the many outreach activities the Securities Division conducted over the past month, visiting almost 1000 people in 18 different communities in 13 different counties.
June 2010
In this issue, Secretary Elaine Marshall calls on House-Senate conferees negotiating a compromise financial industry regulatory reform bill to adopt strong investor protection provisions in the final bill, including provisions that would 1) apply a fiduciary standard to broker-dealers and insurance agents who provide individualized investment advice; 2) require rule changes that would prevent securities law violators from being able to claim certain filing exemptions on private offerings and that would exclude the value of a person's primary residence from the definition of "accredited investor;" 3) allow state securities regulators to assume responsibility for regulating investment advisers with up to $100 million in assets under management; 4) permit the inclusion of representatives from state securities, banking and insurance regulators as nonvoting members of a new Financial Stability Oversight Council; and 5) end the requirement that client-broker disputes be resolved through mandatory arbitration. We include an alert released by the Securities and Exchange Commission (SEC) that warns investors about schemes based on false Gulf oil spill cleanup claims, as well as a warning from David Massey, North Carolina's Deputy Securities Administrator, about investment opportunities that purport to address any natural or man-made disaster. We include reports on presentations representatives from the Securities Division gave recently to the Investors Roundtable of Wilmington, the Financial Fraud, Schemes and Exploitation Summit in Asheville, and to the Financial Planners Association of the Triangle. We include our updated calendar of upcoming events and a new feature, a section entitled "On The Docket" which will keep track of the public proceedings in cases in which the North Carolina Securities Division has had some involvement, either as the lead investigative agency or in a supporting role. Finally, we include public notices we think would be of interest to investors from the Commodities Futures Trading Commission (CFTC), SEC and the Financial Industry Regulatory Authority (FINRA).
May 2010
In this issue, Secretary Elaine Marshall calls on Congress to include an "Honest Broker" provision in the financial regulatory reform bill that is being considered. Are you an informed investor? Do you understand derivatives? If not, read our article that explains how these complex securities work and what the potential risks and rewards are for informed investors. Included is an update on the planning of a series of compliance workshops the Securities Division intends to hold for state-registered investment advisers and their representatives. For those interested in following the on-going debate about whether broker-dealer firms should be allowed to require that all disputes be settled through binding arbitration might like to view a Webcast that was conducted by the SEC's Investor Advisory Committee on May 17. Follow the link in the newsletter to view a panel discussion on this topic. The Securities Division recently participated in the 2010 Senior Schemes Jam sponsored in Charlotte by the Better Business Bureau Consumer Foundation. Also included is an updated calendar of upcoming events and news of our latest administrative action against John Bryan Philpott, Todd Andrew Witt, and Aspire Wealth Management, Inc. In news from the federal regulators, there are links to preliminary reports about the findings of a joint SEC-CFTC investigation into the events triggering the unusual market activity of May 6. There is also news about the latest action against Tyrone "Cauzae" McCall by the CFTC. McCall is already serving time for securities fraud and obtaining property under false pretenses as a result of a Securities Division investigation.
April 2010
In this issue, we spotlight George Allen Clark who pled guilty this month to felony securities fraud and was sentenced to 90 to 117 months in prison for defrauding an elderly investor of $200,000. The Securities Division also announced that it is part of a 13-state task force that has been conducting a two-year, on-going investigation of Morgan Keegan & Co., Inc., the Memphis, Tennessee-based investment banking, securities brokerage, trust and asset management division of Regions Financial Corporation. At the center of the investigation are six bond mutual funds sold by Morgan Keegan broker dealers that lost approximately $2 billion between March 2007 and March 2008. North Carolina investors who believe any loss they experienced in one or more of the funds may file a complaint with the Division. Our focus article this month is on energy schemes. We provide a checklist of five key areas to examine before investing in any energy-related venture. We also explain so-called "Regulation D" offerings. Also included is an update on the student-led, community-based investor education program that is underway at NC A&T State University. The Securities Division was among the agencies that provided a representative to the "Welcome Home" ceremony for almost 4000 members of the NC National Guard 30th Heavy Brigade Combat Team that recently returned home from its second tour of duty in Iraq. Finally, in addition to our regular inclusion of a calendar of upcoming events and the latest enforcement actions taken by the Securities Division, we have introduced a new section that collects selected public notices from one or more of the federal securities regulators.
March 2010
In this issue, we report that Securities Division law enforcement agents arrested Dennis Todd Hagemann of Raleigh on 56 counts of felony securities fraud and obtaining property by false pretenses. The charges allege Hagemann defrauded victims out of $980,000 in a foreign currency trading scheme. Hagemann is also facing federal civil action brought against him by the U.S. Commodities Futures Trading Commission. We also explain how Ponzi schemes work. We spotlight the Smart Investor Notepad as a resource to help investors keep accurate notes when speaking with their brokers. We also highlight a warning from the Securities and Exchange Commission (SEC) about a fake "Madoff Victims" Web site purporting to have found $1.3 billion in funds hidden in Malaysia by convicted Ponzi schemer Bernard Madoff. Finally, we include our latest calendar of upcoming events and our latest enforcement actions.
February 2010
In this issue, we provide tips on how to avoid the hidden risks related to seminars or computer programs promoting foreign currency exchange trading, also known as FOREX or FX Trading. We also spotlight a community service program for students at North Carolina A&T State University. Through their participation in the program, NC A&T students will learn to recognize the warning signs of potential investment fraud as well as the psychological pressure tactics employed by con artists. They will then take what they have learned back to their home communities, thereby helping to reduce the incidence of investment fraud. Also included in this issue is a notice to registered broker-dealers to be mindful of their legal responsibilities under the North Carolina Securities Act when approached by life settlement providers to sell private placements of securities based on life insurance policies. We also report on the Securities Division's participation in several events during Military Saves Week, our recent enforcement actions and an updated calendar of upcoming events.
January 2010
In this issue, we report on the latest developments in two separate cases involving auction rate securities (ARS). In the first case, Deutsche Bank Securities, Inc., has agreed to buy back approximately $8.6 million in ARS investments from North Carolina investors under a settlement signed by NC Secretary of State Elaine Marshall on January 13, 2010. In the second case, the North Carolina Securities Division filed an administrative petition on January 19, 2010, asking that Secretary Marshall revoke or indefinitely suspend E*Trade Securities, LLC, from selling investments in the state due to alleged wrongdoing by the company between 2005 through 2008 in respect to its sale of ARS to customers in North Carolina. The company has 30 days in which to request a public hearing before Secretary Marshall or her designee. We also report that the NC Rules Review Commission approved the Department's proposed rule on the use of senior designations by securities dealers, securities salesmen, investment advisers and investment adviser representatives. We have also updated our Calendar of Upcoming Events and report that J.V. Huffman, Jr., of Claremont, NC, pleaded guilty on January 25, 2010, to over two dozen counts and was sentenced to 30 years in prison. Securities Division investigators determined that Huffman defrauded approximately 500 people out of $25 million between 1991 and 2008 by issuing various kinds of promissory notes through his company, Biltmore Financial Group. Huffman claimed that funds would be used to buy and sell real estate mortgages or deeds of trust. Instead, Huffman converted the funds to his own personal use, supporting a lavish lifestyle.