June 21, 2018
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Investigators looking into unlicensed investment sales

By Russ Van Arsdale, executive director, Northeast Contact

We’ve urged caution in the past when making investments. Now, as the economy remains less than vibrant, some sellers are cutting corners and hoping that their promises of large, quick returns will overpower our common sense.

The old adage still applies: if it sounds too good to be true, it is.

Maine’s Office of Securities is actively pursuing cases in which unlicensed sellers operate in the state. Office investigators are also looking for licensed sellers who may be selling investment products that are not registered in the state.

In a news release last week, Securities Administrator Judy Shaw said her office has reached a consent agreement targeting the unlicensed sale of an unregistered investment product. A consent agreement is a legal stipulation that, while the signer admits no legal wrongdoing, he will not do it again.

In this case, Jesse Bean of Calais sold a one-year promissory note to a 78-year-old Maine resident. The promissory note was not registered in Maine. Bean convinced the buyer to finance the deal by surrendering a Bankers Life and Casualty Equity Indexed Annuity (EIA) Bean had sold the resident a year earlier for more than $51,000.

The resident agreed, even though it cost a 10 percent surrender fee. Bean assured the resident that not only would he recover the surrender charge within a year, but also he would make a lot more money if his funds were invested in a Genesis note rather than the Bankers Life EIA.

A couple of things were wrong with those promises. The value of the property that Genesis bought using the resident’s money was less than what the resident invested; also, the loan was not fully collateralized. Although he had been told his money would pay only 70 percent of the closing costs, those funds covered all the closing costs; so, Genesis did not contribute 30 percent of the purchase price as promised.

In signing the consent order, Bean agrees not to associate with any investment adviser, issuer or broker-dealer for two years. Instead of a civil penalty, he’s begun making restitution of $5,000 to the heirs of the Maine resident.

Shaw notes that most investment firms and their employees have good track records and act in their investors’ best interests. She says when that is not the case, her office will go after violators aggressively. Last year, Shaw’s office ordered restitution totaling over $6.4 million to investors and got another $164,000 restitution without taking formal action.

Shaw urges all investors to check the license status of anyone who offers investment products for sale and to make sure the investment product is properly registered in Maine. You can check online at www.maine.gov/pfr/securities or by calling 877-624-8551(TTY: 888-577-6690).

Last month, the Office of Securities announced the launch of a searchable database of stock brokers and investments advisers. Prospective buyers can check to see if a broker or adviser has any history of disciplinary action. The database is maintained by FINRA, the Financial Industry Regulatory Authority. Find it online at www.finra.org/brokercheck.

Consumer Forum is a collaboration of the Bangor Daily News and Northeast CONTACT, Maine’s membership-funded, nonprofit consumer organization. Individual and business memberships are available at modest rates. For assistance with consumer-related issues, including consumer fraud and identity theft, or for more information, write: Consumer Forum, P.O. Box 486, Brewer 04412, go to http://necontact.wordpress.com, or email atcontacexdir@live.com.

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