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A PATH TO FINANCIAL FITNESS FOR BUSINESS AND YOU!

A PATH TO FINANCIAL FITNESS FOR BUSINESS AND YOU!. Edwin L. Reed Deputy Director. ASC , a state government agency, regulates the securities industry in Alabama at the state level. Includes registration/licensing of most financial professionals and the products offered to anyone.

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A PATH TO FINANCIAL FITNESS FOR BUSINESS AND YOU!

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  1. A PATH TO FINANCIAL FITNESS FOR BUSINESS AND YOU! Edwin L. Reed Deputy Director

  2. ASC , a state government agency, regulates the securities industry in Alabama at the state level. Includes registration/licensing of most financial professionals and the products offered to anyone. The US Securities & Exchange Commission (SEC) regulates programs at the federal level.

  3. What is a Security? • The investment of money • In a common enterprise • With the expectation of profit • Based on the management efforts of others The Howey Test The Howey test is a three step process used to determine if a product or offering is an investment contract, or in other words, a security. The test stems from a 1946 Supreme court case involving the Securities and Exchange Commission versus W. J. Howey Company. The court found that an investment contract is an investment of money or other tangible consideration in a common enterprise with reasonable expectations of profit derived solely from the efforts of others, i.e. investing money into a business where a profit is gained without effort on the investor’s part is a security.

  4. ASC is located in Montgomery, Alabama in The Alabama Center for Commerce Building at 401 Adams Avenue. • ASC has almost 50 employees. • ASC is a self-funded agency and returns $8-12 million in revenue to the Alabama General Fund each year.

  5. REGISTRATION Revenue Enhance credibility of financial professionals & products • ENFORCEMENT Enforce the Alabama Securities Act and other associated laws • EDUCATION & PUBLIC AFFAIRS Investor education, fraud prevention and public awareness

  6. A PATH TO FINANCIAL FITNESS • SPENDING YOUR WAY TO WEALTH • DEBT MANAGEMENT • SAVING FOR A RAINY DAY • INVESTING (WHAT BUSINESS PEOPLE SHOULD KNOW) • ASSET PROTECTION AND FRAUD PREVENTION

  7. A PATH TO FINANCIAL FITNESS • ASSET PROTECTION AND FRAUD PREVENTION • Before you invest check it out! • Before you invest check it out! • Before you invest check it out! HIND SIGHT 20 - 20

  8. A PATH TO FINANCIAL FITNESS • KEY ACTIONS INVOLVING CAPITAL FORMATION • Before you go public or raise capital through other investors or partners consider the services of a qualified attorney to ensure compliance with securities Regulatory authorities and laws.

  9. KEY ACTIONS INVOLVING CAPITAL FORMATION EXEMPTIONS ARE OFTEN USED TO RAISE CAPITAL www.asc.alabama.gov

  10. EXAMPLES CAPITAL FORMATION AND INVESTING OPPORTUNITIES GONE ASTRAY IN ALABAMA OPEN CASE WITH AN INDICTMENT - IT IS ALLEDGED (JUNE 2011) HOOVER MAN OFFERS AND SELLS INVESTMENTS THROUGH SELF-DESCRIBED INVESTMENT CLUBS IDENTIFIED AS THE CORNERSTONE INVESTMENT GROUP, THE CAPSTONE GROUP, AND THE TRI STONE GROUP. HE WAS NOT REGISTERED WITH ASC TO SELL SECURITIES!

  11. EXAMPLES CAPITAL FORMATION AND INVESTING OPPORTUNITIES GONE ASTRAY IN ALABAMA ARIZONA MAN SENTENCED IN TALLADAGA COUNTY (MAR 2010) GROBSTEIN CONVICTED FOR VIOLATION OF THE AL SECURITIES ACT AND PAID $63,832 IN RESTITUTION. OFFERED AND SOLD PROMISSORY NOTES TO ALABAMIAN AS A FINANCIAL CONSULTING FIRM REGISTED IN AZ AND CONSPIRED WITH A MITCHELL FROM SYLACAUGA TO OFFER AND SELL PROMISSORY NOTES. MITCHELL IS SERVING A SEVEN YEAR SENTENCE FOR MULTIPLE COUNTS OF SECURITIES FRAUD. BOTH NOT REGISTERED WITH ASC TO SELL SECURITIES!

  12. EXAMPLES CAPITAL FORMATION AND INVESTING OPPORTUNITIES GONE ASTRAY IN ALABAMA CALIFORNIA MAN PLED GUILTY TO ILLEGAL OFFERING – HIDDEN UNDER SEC EXEMPTION BOTH STANLEY AND ESTER JOHNSON PLED GUILTY TO ILLEGAL SECURITY OFFERINGS WITH A COMPANY CALLED ADVANCED BODY IMAGING LOCATED IN ORANGE COUNTY, CA. THIS GUILTY PLEA RELEATES TO A PARTICULAR OFFER THAT WAS REVEALED IN AN INVESTIGATION OF A BOILER ROOM TYPE OPERATION.

  13. EXAMPLES CAPITAL FORMATION AND INVESTING OPPORTUNITIES GONE ASTRAY IN ALABAMA (MAY 2005) MONTGOMERY MAN ORDERED TO CEASE AND DESIST ISSUING PROMISSORY NOTES TO RAISE CAPITAL FOR REAL ESTATE VENTURES . NEITHER FRAUD OR THEFT WERE INVOLVED. THE PERSON SELLING THE PROMISSORY NOTE AND THE OFFER WERE NOT REGISTERED WITH THE ASC. THIS TURNED OUT TO BE A COMPLIANCE ISSUE.

  14. EXAMPLES CAPITAL FORMATION AND INVESTING OPPORTUNITIES GONE ASTRAY IN ALABAMA (MAR 2005) EDWIN RICK WOOD, MILLBROOK AL, SENTENCED FOR SECURITIES FRAUD AND THEFT OF PROPERTY. THE PERSON SELLING THE PROMISSORY NOTE AND THE OFFER WERE NOT REGISTERED WITH THE ASC. WOOD FRAUDULENTLY INDUCED RESIDENTS FROM THE STATES OF AL, FL, LA, AND TN TO INVEST IN PROMISSORY NOTES (20-40% RETURNS).

  15. EXAMPLES CAPITAL FORMATION AND INVESTING OPPORTUNITIES GONE ASTRAY IN ALABAMA WOOD TOLD INVESTORS THAT THEIR MONEY WOULD BE USED FOR CONSTRUCTION PROJECTS WITH HIS COMPANY CALLED THREE HANDS CONSTRUCTION, LLC. WOOD FALSELY LED INVESTORS TO BELIEVE HE HAD EXCLUSIVE RIGHTS TO GOVERNMENT CONSTRUCTION CONTRACTS IN MILLBROOK AND MONTGOMERY.

  16. A PATH TO FINANCIAL FITNESS • PRODUCT SUITABILITY ISSUES – BEFORE YOU BUY OR INVEST: • BEFORE YOU BUY OR INVEST • UNDERSTAND YOUR PRODUCT • COMPARE YOUR PRODUCT • CHECK IT OUT!

  17. Anyone can become a victim of financial fraud, especially financially literate people. • Investment fraud victims are more likely to rely on their own experience and knowledge when making investment decisions A study by the NASD Investor Education Foundation, WISE Senior Services and AARP Foundation

  18. Financial abuse targeting seniors costs more than $2.6 billion a year¹ About 7.3 million seniors (one out of every five citizens over age 65) have previously been victimized by unsuitable products or fraudulent activity² -------------------------------------------------------------------------------------- ¹ Report of MetLife Mature Market Institute, the insurer’s research arm. ² Survey of the Investor Protection Trust, June 2010.

  19. A PATH TO FINANCIAL FITNESS • SHORT MOVIE CONCERNING SECURITIES FRAUD • Before you invest check it out! HIND SIGHT 20 - 20

  20. Stay on guard, the enemy is lurking: Red Flag Phrases for Investment Fraud ¨ “Guaranteed to double your money”  ¨ “Low risk for high returns”  ¨ “You should act right now; this is a limited-time offer.”  ¨ “It takes advantage of a little-known loop hole in tax laws.”  ¨ “Keep this investment secret - we don’t want to let everyone in!”  ¨ “To get the most from this investment opportunity, you can borrow money or take out a mortgage and be set for life.”  ¨ “I’m calling from outside Alabama with an investment opportunity.”  ¨ “This is an off shore investment opportunity.” Fraud prevention tactics may be similar to security procedures: “Continued awareness and need to constantly change to keep up with or ahead of the adversaries and threat...”

  21. A PATH TO FINANCIAL FITNESS • WHEN YOU DEAL WITH A FINANCIAL PROFESSIONAL • What you need to know when dealing with a financial professional • What you need to know when buying/selling investments by yourself

  22. Anytime, from anywhere go to the ASC website at: www.asc.alabama.gov or call 1-800-222-1253 to check it out or acquire more information.

  23. THANK YOU FOR ATTENDING TODAY AND I HOPE YOU WILL STAY ON YOUR PATH TO FINANCIAL FITNESS!!! ARE THERE ANY QUESTIONS?

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