2020 Caregivers Summit
Caring for a loved one can be challenging, and those providing care during the COVID-19 pandemic need even more support and encouragement. The Caregivers Virtual Summit on Thursday, October 22 will provide educational sessions and a chance to ask exhibitors and sponsors questions. Registrants will have access to all the presentations for one year.
Join Secretary of State Elaine Marshall and NCSOS Legal Specialist Ann Elmore as they speak at the Summit and then drop by our Agency’s virtual booth to ask our staff questions about everything from our Advance Health Care Directive Registry and the dangers of counterfeit prescription drugs to protecting seniors from investment fraud.
Today (10/21) is the last day to register for this informative, free Summit, so don't delay!
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Notarial Changes on 2020 Absentee Ballots
As North Carolina’s notary regulator the Secretary of State’s Office has been getting questions about the role of notaries in the absentee ballot process for the upcoming general election. This video explains the changes that a new temporary law passed by the NC General Assembly has made to the notary’s role in the absentee ballot process for this fall’s election.
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NASAA Releases Annual Enforcement Report
The North American Securities Administrators Association's annual enforcement report shows increasing numbers of investigations and enforcement actions taken by state securities regulators to protect investors and maintain the integrity of the nation’s financial markets.
In its 2020 Enforcement Report on 2019 Data, which includes responses from 51 jurisdictions throughout the United States, NASAA reported that state securities regulators conducted 6,525 investigations in 2019, up 23 percent from the year before, and took 2,755 enforcement actions, up 33 percent from 2018. These actions led to $634 million in restitution ordered returned to investors, fines of $80 million and criminal relief of 956 years, including incarceration and probation.
“State securities regulators are on the front lines in the fight against financial exploitation and investment fraud. This report reflects the responsive and effective actions taken by NASAA members against a wide variety of actors who seek to do harm to Main Street investors,” said Lisa Hopkins, NASAA President and West Virginia Senior Deputy Securities Commissioner.
“NASAA and its members recognize the challenges facing investors amid an ever-increasingly complex saving and investing marketplace and will continue to work to make sure they are treated fairly,” said Joseph P. Borg, Director of the Alabama Securities Commission and Chair of NASAA’s Enforcement Section.
Within the licensed securities industry, state securities regulators reported actions against 1,218 registered parties, including 200 broker-dealer firms, 391 broker-dealer agents, 193 investment advisers and 434 investment adviser representatives. State securities regulators also take actions to protect the public from unlicensed actors and unregistered schemes. In 2019, state securities regulators reported an increase in the number of cases brought against unregistered parties. Actions against unregistered actors totaled 738 in 2019, a 15 percent increase from the year before.
State securities regulators continued to take strong steps to prevent bad actors from operating within the licensed securities industry, and to limit the activity of licensees and registrants when warranted. In 2019, more than 4,800 license/registration applications were withdrawn as a result of state action or attention, a slight increase from approximately 4,500 withdrawals reported during 2018. This information is indicative of the measures regulators take to prevent bad actors from entering the market. In many cases, applicants withdraw their candidacy for licenses or registrations due to state investigations or forthcoming actions to deny, suspend or revoke their applications.
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Investment Scams May Seek to Exploit Natural Disasters |
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After a natural disaster strikes, fraudsters may try to take advantage of individuals who want to help fund recovery efforts or who receive lump sum insurance payouts.
Fraudsters may use recent natural disasters, including Hurricane Laura, Hurricane Sally, and the wildfires on the West Coast, to lure victims into investment scams. These scams can take many forms.
- Bad actors may direct you to make “investments” in companies supposedly involved in cleanup, repair and recovery efforts.
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They may promote the stock of companies that supposedly will reap huge profits from recovery and cleanup efforts, and then sell their own shares of the stock at the inflated price. This is called a “pump-and-dump” scam.
Fraudsters may attempt to reach individuals on a large scale through unsolicited emails, on social media, or by telephone. The bad actors also may directly target individuals receiving money from insurance companies or other sources. They may make false claims of affiliation with state and federal governments or large, well-known companies.
Be Skeptical and Ask Questions
Be skeptical if you are approached by somebody touting an investment opportunity. When considering any investment, one of the best ways to avoid investment fraud is to ask questions.
- Ask the person if he or she is licensed and if the investment is registered with the SEC and the NC Secretary of State's Securities Division. Always call the NC Investor Hotline at (800) 688-4507 to check the registration of the person offering you an investment opportunity and of the investment opportunity itself.
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Use Investor.gov’s free and easy search tool to check the background, including license and registration status, of anyone who tries to sell you an investment.
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You also can use the SEC Action Lookup - Individuals (SALI) feature on SEC.gov to find information about certain people who have had judgments or orders issued against them in SEC court actions or administrative proceedings.
Remember that promises of high guaranteed returns with little or no risk is a classic sign of a scam like a Ponzi scheme or offering fraud.
Protect Your Money
Take a close look at your entire financial situation before making any investment decision, especially if you received a large payment to assist with recovery efforts. Remember, your payment may have to help finance your recovery as well as last you and your family for a long time.
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2020 Ketchum Prize: The Financial Security of Americans with Disabilities
In the 30 years since the passage of the of the Americans with Disabilities Act, or ADA, there have been profound changes. But as we mark the 30th Anniversary of the ADA, much remains to be done to advance the economic self-sufficiency of Americans with disabilities.
Michael Morris’s research into and advocacy work around the financial security and capability of Americans with disabilities earned him the 2020 Ketchum Prize, the FINRA Foundation’s highest honor, which looks to recognizes outstanding service and research to advance investor protection and financial capability in the United States.
In this month's episode of FINRA UNscripted, Host Kaitlyn Kiernan talks to National Disability Institute Founder Michael Morris about his research, the intersection of race and disability, potentially impactful policy changes yet to be made, and what leaves him feeling optimistic about the future.
Click the image below to listen to the conversation.
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Resources mentioned in this episode:
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One Call Could Save Your Life Savings!
Is that individual offering you an investment opportunity licensed to sell securities in North Carolina? Is the investment opportunity itself registered? Know before you sign!
While registration in and of itself is no guarantee against fraud, not being registered is a very big red warning flag.
We urge you to take five minutes to call our NC Investor Hotline at 1-800-688-4507 to see if the person you have been dealing with – perhaps even for years – is properly registered and/or has a disciplinary history. You can also check to see if the actual investment itself is properly registered.
Pick up the phone and call us. You owe it to yourself and your family to check. And please also consider sharing the information in this newsletter with YOUR contacts or your social networks. Doing so will help keep your friends and loved ones safe, too. More information can be found at https://www.sosnc.gov/divisions/securities/for_investors.
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SEC Risk Alert: Safeguarding Client Accounts against Credential Compromise
According to the FBI, so-called “credential stuffing” accounts for 41% of cyber-attacks on the financial sector. In recent examinations, the Office of Compliance Inspections and Examinations (OCIE) has observed an increase in the number of credential-stuffing cyber-attacks against SEC-registered investment advisers and broker-dealers.
Credential stuffing — a method of cyber-attack on client accounts employing an automated attack on web-based user accounts as well as direct network login account credentials, results in the possible loss of customer assets and unauthorized disclosure of sensitive personal information. Cyber-criminals obtain lists of usernames, email addresses, and corresponding passwords from the dark web and then use automated scripts to try the compromised user names and passwords on other websites, such as a registrant’s website, in an attempt to log in and gain unauthorized access to customer accounts.
Victim of Cybercrime? Dial 2-1-1 for Help!
United Way of North Carolina, through NC 211, its information referral system, and the Cybercrime Support Network (CSN) have launched North Carolina’s first cybercrime support and recovery hotline. The new system allows North Carolina residents to dial 2-1-1 to report and find resources to recover from identity theft, financial fraud, cyberstalking, cyberbullying and other cybercrimes. This initiative was made possible through a Victims of Crime Act (VOCA) Victim Assistance Grant that was awarded by the North Carolina Governor’s Crime Commission.
Businesses and individuals in all 100 counties in North Carolina can simply dial 2-1-1
to be connected with trained call specialists who can assess the situation and place them in touch with organizations that can help. The service is free and confidential and is available 24/7/365. This program will complement and work in collaboration with law enforcement to improve service together.
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SEC Staff Report on U.S. Credit Market Interconnectedness and the Effects of the COVID-19 Economic Shock
The Securities and Exchange Commission published a staff report on Oct. 5th titled U.S. Credit Markets: Interconnectedness and the Effects of the COVID-19 Economic Shock, which focuses on the origination, distribution and secondary market flow of credit across U.S. credit markets. The staff report also addresses how the related interconnections in our credit markets operated as the effects of the COVID-19 pandemic took hold.
In the U.S. credit markets, banking and non-banking entities and intermediaries are intricately and inextricably interconnected. These interconnections are essential for the functioning of the markets, the provision of credit and the distribution of risk. These interconnections can also transmit and amplify risks in times of stress. The report identifies these interconnections and, with that framework, discusses how the COVID-19 economic shock reverberated through the credit markets in March and April 2020.
The principal purpose of the report is to identify and place in context key structural- and flow-related interdependencies in the U.S. credit markets as well as areas of stress revealed by the COVID-19 shock, with an eye toward informing policymakers as they seek to improve the functioning and resilience of our financial markets. The report does not make policy recommendations. The report is accompanied by a cover letter from SEC Chairman Jay Clayton and SEC Chief Economist S.P. Kothari and was discussed at an Oct. 14th roundtable meeting, which included policymakers and market participants.
"I am grateful to S.P. Kothari, SEC Chief Economist, and the many members of our staff who contributed to this report," said Chairman Clayton.
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FTC Issues Annual Report to Congress on Protecting Older Adults
The Federal Trade Commission’s annual report to Congress on protecting older adults provides a detailed look at the scams that most often affect adults over 60, as well as the FTC’s research, law enforcement, and education efforts aimed at protecting older consumers—a top priority for the agency.
As part of the FTC’s efforts to understand how fraud is affecting older adults, the report, Protecting Older Consumers 2019-2020: A Report of the Federal Trade Commission, includes analysis of FTC consumer complaint data. In 2019, as in prior years, older adults (aged 60 and older) were less likely than younger adults (aged 20 to 59) to report losing money to fraud, but reported much higher individual dollar losses. In fact, people aged 80 and older reported losing the most, with a median individual reported loss of $1,600.
Although they were less likely to report falling victim to fraud overall, adults aged 60 and older were more likely to report losing money to certain specific types of scams. They were nearly six times more likely to report losing money to tech support scams than younger consumers, according to the report, and were three times more likely to report losses due to prize, sweepstakes, and lottery scams. They were also more than twice as likely as younger adults to report losses due to impostor fraud where someone was impersonating a friend or family member.
The most frequent type of fraud reported by older adults was online shopping scams, which mirrored a significant increase in that type of scam reported in the early months of the pandemic across all age groups. Older adults reported losing the most money to romance scams, with $84 million in reported losses, followed by government imposter scams at $61 million, and prizes, sweepstakes, and lottery scams at $51 million.
In addition to the analysis of complaints, the report also focuses on key enforcement actions the FTC has taken to protect older consumers, including against pyramid schemes and other money-making scams, bogus credit card interest rate reduction schemes, deceptive publications, and companies making unsubstantiated health claims (including some claims related to the coronavirus pandemic). The report highlights a number of ongoing law enforcement partnerships in which the FTC works with other federal agencies, along with state and local authorities, to take actions to protect older consumers.
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NASAA Releases Results of Benchmarking Initiative To Help Measure Effectiveness of Regulation Best Interest
Results of a nationwide examination of broker-dealers and investment advisers by state securities regulators provide the first comprehensive look at industry practices prior to the implementation of the Securities and Exchange Commission’s Regulation Best Interest and provides important benchmarking data to help measure the effectiveness of the new federal standard of care regulation.
The results were included in a report on a comprehensive benchmarking initiative issued by the Regulation Best Interest Implementation Committee of the North American Securities Administrators Association (NASAA).
Examinations were conducted in the first quarter of 2020 of more than 2,000 broker-dealer and investment adviser firms representing more than 360,000 investment professionals and 68 million retail investment accounts. State examiners from 34 jurisdictions participated in the coordinated initiative. The examinations were designed to establish a baseline of practices as they stood in 2018 in several areas, including sales of complex and risky products, compensation practices, including sales contests, cost comparison, fee disclosure and conflict management.
“The examinations identified compliance challenges for industry. We appreciate the strong industry cooperation in these examinations and we look forward to seeing how industry addresses these challenges,” said Lisa Hopkins, NASAA President and West Virginia Senior Deputy Securities Commissioner.
The examinations found notable differences between broker-dealers operating under a suitability standard and investment advisers operating under fiduciary duties. For example:
• Investment advisers generally took more conservative investment approaches overall, avoiding higher cost, riskier, and complex products. Investment advisers also reported more robust due diligence, disclosure, and conflict management practices.
• Broker-dealers offered a more diverse set of product offerings than investment advisers.
• Few firms offered complex, risky products like private offerings, variable annuities, non-traded real estate investment trusts (REITs), and leveraged- or inverse- exchange-traded funds (ETFs). In fact, two-thirds of the firms surveyed did not make any of these products available to their customers.
• When complex products were sold, broker-dealers were twice as likely as investment advisers to recommend the purchase of leveraged and inverse ETFs, seven times as likely to recommend private placements, eight times as likely to recommend variable annuities, and nine times as likely to recommend non-traded REITs.
“Both broker-dealers and investment advisers have a significant opportunity to improve under Regulation Best Interest in order to better serve the interests of their retail clients,” said Andrea Seidt, Ohio Securities Commissioner and Chair of NASAA’s Regulation Best Interest Implementation Committee. “We are closely watching the industry’s early implementation of the SEC’s Regulation Best Interest with an eye toward determining whether the rule benefits investors as intended.”
Hopkins said state securities regulators will conduct follow-up examinations next year to assess the effectiveness of Regulation Best Interest.
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On September 8, a federal grand jury returned a superseding indictment charging Joshua Matthew Houchins, 36, of Sanford, NC, with fraud, money laundering, obstruction of justice and firearms offenses. The charges were announced today in federal court. The Federal Bureau of Investigation and the North Carolina Secretary of State are investigating the case. The Wake County Sheriff’s Office, Apex Police Department, and Sanford Police Department, also provided assistance. Assistant U.S. Attorney William M. Gilmore is prosecuting the case. An indictment is merely an accusation. The defendant is presumed innocent until proven guilty. For more information, please see this press release.
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On August 13, Mark Colin Ramsey, 50, of Graham, N.C., was sentenced to 65 months in prison for operating a $1.1 million investment scheme. U.S. District Judge Martin Reidinger also ordered Ramsey to serve three years of supervised release and to pay restitution in the amount of $1,098,333.92. North Carolina Secretary of State Elaine F. Marshall joins U.S. Attorney Andrew Murray in making this announcement. According to filed court documents and statements made in court, from April 2008 to September 2013, Ramsey defrauded more than 20 victims out of nearly $1.1 million through a fraudulent investment scheme. In making the announcement, U.S Attorney Murray thanked the Securities Division of the North Carolina Department of the Secretary of State for their investigation of this case. For more information, please see this press release.
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On August 3, 2020, Anthony Wayne March, of Wake Forest, NC, pleaded guilty to wire fraud for his role in an $8.1 million Ponzi scheme (see press release). According to court documents, March, 49 years old, operated the non-profit 501(c)(3) entity Asset Trader, located in Rolesville, NC, between 2012 to 2015. March represented that Asset Trader offered educational services to professionals and taxpayers in the area of exit planning. Asset Trader’s stated educational mission allowed it to obtain classification as a 28 U.S.C. § 501(c)(3) tax-exempt non-profit organization. Asset Trader used its §501(c)(3) tax-exempt status to solicit tax-deductible donations in exchange for charitable gift annuities (“CGAs”) and to recruit referral sources to obtain assets from potential donors. Through Asset Trader, March and his co-conspirators engaged in and executed what is commonly known as a “Ponzi” scheme to defraud investors by inducing them to invest with Asset Trader. The Internal Revenue Service Criminal Investigation Division (IRS-CI), and the North Carolina Secretary of State, Securities Division conducted the investigation in this matter. March's sentencing in US District Court for the Eastern District of North Carolina is currently scheduled for December 8, 2020.
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On June 11, 2020, Joseph Maurice Deberry, a/k/a Joseph Maurice Dewberry, 56, of Charlotte, appeared before U.S. Magistrate Judge David S. Cayer on June 11, 2020, and pleaded guilty to wire fraud, for orchestrating an investment scheme that defrauded victims of hundreds of thousands of dollars. According to admissions Deberry made in plea documents and the June 11th plea hearing, from 2016 through June 2019, Deberry fraudulently obtained hundreds of thousands of dollars from more than a dozen investors. As part of the scheme, Deberry induced victims to invest in entities with which he was affiliated, such as Pinnacle Investment Properties, LLC and Place Capital Group LLC, among others. Deberry typically represented to investors that their money would be used to further projects related to the construction of student housing at certain colleges in the Carolinas and other ventures. As Deberry admitted in court and in related filings, rather than use the victims’ money as he had represented, Deberry used a significant portion of their funds to pay for personal expenses like rent, entertainment and travel. Further, Deberry actively concealed from his victims the fact that he was under a Cease and Desist Order from the North Carolina Secretary of State's Securities Division prohibiting him from offering for sale, soliciting offers to purchase, or selling any securities in North Carolina. Deberry concealed this information from victims by, among other things, telling them that his name was Maurice Dewberry. Deberry pleaded guilty to wire fraud. The charge carries a maximum prison sentence of 20 years and a $250,000 fine. A sentencing date for Deberry has not been set. For more information, see this press release.
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On April 16, 2020, the North Carolina Department of the Secretary of State, Securities Division entered into a Final Consent Order ("Order") with Ferry Capital Management, LLC ("FCM") and Paul Edward Ferry. The Order found that Respondents transacted business in North Carolina as an investment adviser and an investment adviser representative without being registered, in violation of the North Carolina Investment Advisers Act ("Act"). Pursuant to the Order, FCM and Ferry agreed to immediately cease and desist from violating any provisions of the Act and any related administrative rules; keep FCM's Form ADV updated; hire a third-party compliance auditor; attend the Securities Division's Investment Adviser Best Practices Workshop; and pay both a civil penalty and the cost of investigation. For more information, click here.
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NC Department of the Secretary of State
Securities Division
Investor Protection & Education Services
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