By Joseph Borg


     The impeccably dressed principal of the firm walked into the “Board Room.”  Almost 200 crowded desks, every phone was being worked.  He jumped up on the center desk and called for everyone’s attention.  “ … After a year and a half, we’ve settled with the regulators and it’s costing us a million dollars.”  Silence and some hushed “oh, no’s.”  As the principal walked towards his office, one of the newer cold callers approached – “a million dollars,” he said with awe and disbelief.  “That’s OK,” said the principal.  “In the year and a half that it took – we took in over $40 million – it’s just a cost of doing business.”  A passage from a book?  A scene from a movie?  This was an actual event as related to state securities regulators.


     And that’s the attitude of many who steal with slick talk and promises of riches.  It’s time society gets tougher on investment crime.  These white-collar criminals deserve prison time just like thieves, muggers and murders.  No one questions prison time when someone steals your car, or a purse-snatcher robs a lady on the street.  But a rogue broker, a con artist who steals money that your parents need for retirement -- might get fined!  Small unscrupulous firms commit investment fraud by using sophisticated scripts and an army of cold-calling solicitors and brokers who sell fraudulent micro-cap stocks, promissory notes, partnership interests and other so called “investments” to investors by any means, including false and fraudulent representations and dishonest and unethical sales practices -- call it what it is -- lying, cheating and stealing.  Here’s an example of a script taken from a trash can at a brokerage house in Long Island, New York that begins with a stage instruction to speak “slowly and nonchalantly”:


“Two or three times a year, we … get our preferred clients involved with a niche area of the market where we can turn a six, seven figure profit within the course of a few trading hours … .” 


After more hype about a particular stock, the script goes on to say:


“In other words, a return of 100% in 20 minutes perhaps sounds a bit unrealistic, … but that’s exactly how our IPOs trade … we did these deals last year …yielding 34 points within the first ten days of trading … That’s a fact!”


     The complexity, expenses and time-consuming nature of investment fraud cases results in many crimes being handled outside the criminal justice arena.


     It is well established that the bull market on Wall Street has led to a bull market in fraud on Main Street.  Whether it is churning accounts, selling unrealistic investments, promising high returns, manipulating a stock or selling investments in non-existent technology, the effect is the same – billions of dollars lost – hard working citizen’s retirement funds, college money or savings for a home are stolen and lost forever.


     Recently, a victim in one Alabama Securities Commission case clearly made the point when she said, “I’m over 70 years old and I don’t have 30 more years to again save all the money that I will need for the rest of my life.  I would rather have been robbed and beaten up on the street than to have lost all my retirement savings.”


     Unless regulators are given the necessary enforcement tools and resources to strike with criminal sanctions, the “cost of doing business” factor will remain just that.  Federal, state, SRO and local regulators and authorities must discourage rogue broker entrepreneurs by bringing criminal cases, prosecute principals and agents and let it be known that the “cost of doing business” just went up.  Rogue firms or brokers will easily agree to pay a civil fine of $100,000 or even millions as a cost of doing business as long as they can continue to bilk investors of hundreds of millions of dollars.  Securities Week recently quoted veteran prosecutor and New York’s Chief Deputy District Attorney, John Moscow as saying “I do not see how we can deter highly profitable misconduct by having people sign pieces of paper.”  Moscow is right on point – the answer is – we can’t.


     Don’t take white-collar crime lightly.  The damage that it inflicts emotionally and financially can be more harmful and devastating than street crime.  There will always be those who seek to take advantage of others.  As the infamous bank robber Willie Sutton once stated when asked why he kept robbing banks – “That’s where the money is”  -- now the money is in the investment field, in securities and through the Internet.  We are no longer a nation of savers, we are now a nation of investors – and we must be ever vigilant.  The old “street crime” saying is:  “If you do the crime – you do the time” must increasingly become applicable to investment fraud – it’s the only real deterrent.


     The Director of the Alabama Securities Commission cautions potential investors to thoroughly check out any investment opportunity.  Contact ASC for inquiries regarding securities broker-dealers, agents, investment advisors, investment advisor representatives, financial planners, the registration status of securities, to report suspected fraud, or obtain consumer information:


            Write:  Alabama Securities Commission, 770 Washington Avenue, Suite 570, 

                        Montgomery, AL 36130-4700.

Telephone: (334) 242-2984 or 1-800-222-1253.  Fax: (334) 242-0240. 




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