It was our honor to welcome Terry Alexon, Investor Education Coordinator at the Arizona Corporation Commission to speak at our Club on October 11, 2018.
Terry has been the Investor Education Coordinator in the Securities Division for the Arizona Corporation Commission since 2002. She is originally from Ohio and is also the choir director for Holy Trinity Cathedral Greek Orthodox church in Phoenix,
The Securities Division makes sure than security dealers, salespeople, investment advisers and representatives are registered and licensed with the Securities Division. It further reviews applications and monitors the conduct of registrants for any violations of securities and investment adviser laws. The review offerings of securities to investors for fairness and a full disclosure of risk. What kinds of cases are they seeing?
Arizona has long been a hotbed for securities fraud in part due to the large senior citizen and increased investment interest by Baby Boomers.
The division, she says, is seeing gold and mining scams. There was one case of someone inventing a process of extracting gold from clay in kitty litter. He could prove it could be done but he was dishonest with his investors. He had been previously convicted for tax evasion.
Alexon cautioned and warned members that their division can audit and check the background of securities advisers and Financial planners.
There are also real estate scams.
In these instances, they need to pass the Howey Test.
The Securities Act of 1933 and the Securities Exchange Act of 1934 dictate much of the U.S. government’s approach to financial regulation, even nearly 100 years after they were established. Under these acts, transactions which qualify as “investment contracts” are considered securities, meaning that they are also subject to specific requirements related to disclosure and registration. .The Howey Test is the standard methodology, put in place by the U.S. Supreme Court, to make that determination.”
Predictably, this has a significant impact on how the financial world views and interacts with those securities, so it is necessary to have a consistent and thorough way of determining whether a transaction is, in fact, an example of an “investment contract Primarily this prevents a developer from fractionalizing services in investment contracts.
There are also house flipping scams. The flippers start a LLC—a manager-controlled LLC– to pool investor resources.
She spoke of the Baptist Foundation case where they started pressuring parishioners to sell. They created a dummy corporation and intentionally made the decision in order to cover losses to make them look profitable. An AG worked on the case for 5 years and he received 26 years in prison—and his parishioners are still mad at the government for the trial because… they forgave him. The AG sold the land eventually and the parishioners were almost made whole again on their investment.
As for crowdfunding—they can raise up to $1 million without being regulated.
Go Fund Me account complaints are handled by the Arizona Attorney General’s Office and not under the Commission’s jurisdiction.
THE TAKE AWAY Call and research your investment company and advisor AND if you suspect something suspicious ,all the commission and report as early as possible—they have the authority to close accounts and freeze assets.
Visit the website az.investor.gov for the “Wall of Shame”. Thank you Terry for your expertise and being such a fun speaker. We value your work.
What are Securities?
- Mutual funds
- Variable annuities
- Promissory notes, interest in mining ventures
- Real property investment contracts
- Other investment contracts and means of investing one’s money with the expectation of earning a profit
Duty Officers can provide important background information on a company or individual selling investments including license status and disciplinary history (if any).
Registration and Compliance
Duty Officer 602-542-0662 firstname.lastname@example.org
For General Information on wise investing and fraud protection visit www.azinvestor.gov
Arizona Corporation Commission
Securities Division –Third Floor
1300 West Washington St. Phoenix AZ 85007
1-866-VERIFY9 (837-4399) Email email@example.com