Nebraska Department of Banking and Finance

News & Publications

Cease and Desist Order Issued

Publication Date: Jun 8, 2018

NDBF WARNS ABOUT FAKE FINANCIAL REGULATOR

JUNE 8, 2018 (LINCOLN, NEB.) - The Nebraska Department of Banking and Finance is warning Nebraska residents about an entity claiming to be a financial regulator.  The Federal Securities Trading Regulatory Board (“FSTRB”), with a website at www.fstrb.org claims to be operating from 201 North 8th Street, Unit 210, Lincoln, Nebraska.  According to its website, the FSTRB is responsible to “oversee, administer, and enforce the federal securities laws related to Corporate Mergers & Acquisitions.”  The FSTRB also claims to license entities and individuals engaged in the financial industry, including broker-dealers, investment advisers, “deposit taking” institutions, and money transmitters.

 

The Department was contacted by a resident of Finland who reported that a group of investors were attempting to purchase the stock of a company located in Pennsylvania.  During the transaction, the FSTRB became involved in the facilitation of the sale of the stock.  As instructed by a FSTRB employee, the investors wired money to an account in the Philippines. 

 

The Department has confirmed that there is no entity calling itself the FSTRB located at the address listed on its website.  Furthermore, the FSTRB is not a legitimate financial regulator.  It appears that this entity and website were created to give credibility to securities transactions and to induce investors to wire funds to “purchase” the securities. 

 

On June 8, 2018, the Department issued a Cease and Desist Order against FSTRB ordering it to cease acting as a broker-dealer and to cease making false and misleading representations to investors, including representing that they are a regulatory agency. 

 

To help investors determine if they are dealing with a bogus regulator, the North American Securities Administrators Association, an organization consisting of state and provincial securities regulators, including the Department, identified the following warning signs:

  1. You cannot find references to them on any other regulatory websites. If you cannot find information about the “regulator” on the site of the International Organization of Securities Commissions, www.iosco.org, they probably are not a legitimate regulator.

  2. They endorse or approve any investment opportunity, stock, or company. Legitimate regulators are not in the business of promoting any deal, only enforcing securities laws and ensuring fair dealing.

  3. They say that paying a fee to “release restricted shares” is anything other than an attempt to steal your savings. This is a common ploy, and a recent twist on age-old advance fee schemes.

  4. Little or no information about the “regulator” appears in Internet search engines. Any legitimate regulator should generate hundreds of entries in any Internet search engine.

  5. If you talk to other regulators, and they say they have “never heard of them,” you are most likely dealing with a fake regulator.

 

The Department strongly cautions consumers on conducting business over the Internet with financial companies with whom they are unfamiliar.  In many cases, the customer is told to wire money or send a money order, often to a location outside the United States. Consumers never receive the promised services and cannot recover their money.  Furthermore, these consumers may be asked to provide personal information such as social security numbers and bank account numbers to the Internet company, which makes them prime targets for identity theft. 

Individuals who conducted business with the FSTRB are asked to contact the Department.

A copy of the Cease and Desist Order is also available on the Department’s website at www.ndbf.nebraska.gov

More information about the laws governing the financial industries in Nebraska can be found on the Department’s website.  If you have questions about any investment matters, call the Department’s Consumer Hotline toll free at (877) 471-3445 in Nebraska, or (402) 471-3445 if you are out of state.

FSTRB Cease and Desist Press Release

FSTRB Cease and Desist Order

CONSUMER ADVISORY

Publication Date: Aug 16, 2018

STATE RESIDENTS URGED TO BE ON GUARD AGAINST AFFINITY FRAUD

STATE REGULATOR WARNS INVESTORS NOT TO LET GUARD DOWN

 

August 16, 2018 (LINCOLN, NEB.) — The Nebraska Department of Banking and Finance (NDBF) issued a warning today for Nebraska residents to be on the lookout for affinity fraud.  Affinity fraud occurs when an investment promoter plays upon the fact that they share something in common with a potential investor – such as attending the same place of worship, being a member of the same race or ethnic group, or working in the same profession.  Investors are more likely to trust this type of salesperson. But after lowering their guard and giving their money to a promoter, they can end up losing their entire investment.

 

NDBF urges investors to not be taken in by testimonials from other group members who express enthusiasm for an investment’s success. “Many investors fall prey to promoters who may seem to share your values and life experiences,” said Deputy Director Claire McHenry. “But no matter who is promoting an investment opportunity, you should protect yourself by maintaining your skepticism and investigating before investing your money.” 

 

“While early investors may receive returns on their investments, scam artists frequently use money from later investors to pay high returns to early investors.  Those who invest at the later stages of the scam often lose all the money they thought they were investing,” McHenry said.

 

McHenry encourages investors to be leery about promises of “guaranteed” investments since all investments involve risk.  In addition, she said investors should be very skeptical when high rates of return are promised, especially when few investments are earning high returns. 

 

“Affinity fraud are some of the saddest cases that we see,” said McHenry, “because people not only lose their money but they’ve been betrayed by someone they trusted.”

 

More information about the laws governing the securities industry in Nebraska can be found on NDBF’s website at www.ndbf.nebraska.gov. If you have questions about any investment matter, call NDBF’s Consumer Hotline toll free at (877) 471-3445 in Nebraska, or (402) 471-3445 if you are out of state.

20180816 - Consumer Advisory - Affinity Fraud

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NOTICE OF RULEMAKING HEARING

Publication Date: Jun 22, 2018

NEBRASKA DEPARTMENT OF BANKING AND FINANCE

Notice is hereby given that the Nebraska Department of Banking and Finance will hold a rulemaking hearing on July 25, 2018, commencing at 9:30 a.m., at the offices of the Department of Banking and Finance, 1526 K Street, Suite 300, Lincoln, Nebraska 68508.

The purpose of the hearing is to take testimony and evidence concerning the following changes to the Rules and Regulations of the Department:

1) The proposed repeal of Title 45, Chapters 1-5, 10, 13-14, 22, and 29.

2) The proposed repeal of Title 46, Chapters 1-6, 9 and 12.

3) The proposed repeal of Title 47, Chapters 1-11.

4) The proposed revisions to Title 48, Chapters 6, 13, 16, 38, and 39.

5) The proposed repeal of Title 48, Chapter 35.

45 NAC—Banking Rules: Chapters 1-5, 10, 13-14, 22, and 29, are proposed for repeal as such rules are obsolete.

46 NAC—Industrial, Savings & Loan, Credit Union Rules: Chapters 1-6, 9, and 12 are proposed for repeal as such rules are obsolete.

47 NAC—Electronic Transmission Terminal Rules: Chapters 1-11 are proposed for repeal as such rules are obsolete.

48 NAC—Securities Rules: The following amendments are proposed for Title 48:

48 NAC 6—Agents of Broker-Dealers: The purpose of the proposed revision of 48 NAC 6 is to update provisions governing broker-dealer agents. The proposal adjusts examination requirements for agents to correspond to new examination requirements established by the Financial Industry Regulatory Authority.

48 NAC 13—Information Requirements for the Section 8-1110(5) Exchange Exemption: The purpose of the proposed revision of 48 NAC 13 is to eliminate an obsolete notice filing requirement and to designate approved exchanges for the exchange exemption.

48 NAC 16—Information Requirements for the Section 8-1111(15) Agricultural Cooperative Exemption: The purpose of the proposed revision of 48 NAC 16 is to clarify that the filing requirements apply to all cooperatives and limited cooperative associations.

48 NAC 35—Repealed. This chapter is proposed for a complete repeal as such rule is obsolete.

48 NAC 38—Information Requirements for the Section 8-1111(23) Notice: The purpose of the proposed revision of 48 NAC 38 is to increase the amount that can be raised from $250,000 to $750,000, and to authorize issuers to rely upon the federal "Intrastate Offering Exemption", 17 CFR 230.147A.

48 NAC 39—Conditions and Information Requirements for the Section 8-1111(24) Crowdfunding Exemption: The purpose of the proposed revision of 48 NAC 39 is to eliminate certain restrictions on advertising. Issuers will be allowed to advertise across state lines as long as the advertising states that the offering is limited to Nebraska residents.

The rulemaking hearing is being conducted under and by virtue of the provisions of Section 84-907, R.R.S 1943, as amended, which provides that COPIES OF THE PROPOSED RULES ARE AVAILABLE FOR PUBLIC EXAMINATION at the Office of the Department of Banking and Finance, 1526 K Street, Suite 300, Lincoln, Nebraska 68508, and at the Office of the Secretary of State, 1201 N Street, Suite 120, Lincoln, Nebraska 68508. In addition, the proposed rules are available on the Department of Banking and Finance’s website at https://ndbf.nebraska.gov, and the Secretary of State’s website www.sos.ne.gov.

A copy of the Fiscal Impact Statement is available at the Office of the Department of Banking and Finance and on the Department’s website.

All interested persons are invited to attend and testify at the hearing. Interested persons may also submit written comments to the Department of Banking and Finance prior to the hearing, which comments will be made part of the hearing record at the time of the hearing.

If auxiliary aids or reasonable accommodations are needed for attendance at this hearing, please call the Nebraska Department of Banking and Finance at (402) 471-2171, or, for persons with hearing impairments, please call the Nebraska Relay System, (800) 833-7352 TDD. This contact should be made at least seven (7) days prior to the hearing.

Dated at Lincoln, Nebraska, this 19th day of June, 2018.

Mark Quandahl, Director

Nebraska Department of Banking and Finance

 

The drafts can also be found HERE(https://ndbf.nebraska.gov/about/legal/ndbf-2018-rules-updates-hearing-20180725) on the Department's Website.

WORLD ELDER ABUSE AWARENESS DAY

Publication Date: Jun 15, 2018

NDBF RECOGNIZES WORLD ELDER ABUSE AWARENESS DAY

WARNS OF THE DANGER SIGNS FOR SUSPECTED ABUSE BY GUARDIANS

June 15, 2018 (LINCOLN, NEB.) In recognition of World Elder Abuse Awareness Day (WEAAD) today, the Nebraska Department of Banking and Finance (NDBF) reminds financial professionals and the public throughout Nebraska to be on the lookout for the red flags of suspected financial abuse, including potential abuse by guardians assigned to oversee the financial matters of seniors no longer able to do so for themselves.

"A trusted guardian can be a wonderful resource. But sometimes guardians may take advantage of the trust placed in them to look after the people or assets in their care," NDBF Deputy Director Claire McHenry said.

A guardian is a person or entity appointed by a court to exercise some or all authority over a person and/or estate. A guardian has power to make decisions related to the health and safety of the incapacitated person. Financial abuse by guardians occurs when the guardian improperly uses the protected individual’s financial assets.

"Fraudsters often target seniors for financial exploitation because they may be isolated from family, caregivers, and other support networks. That’s why it is important to know the red flags that could signal a senior’s savings may be in danger," Deputy Director McHenry said.

The North American Securities Administrators Association (NASAA), of which NDBF is a member, recently developed a resource to help call attention to the red flags of suspected guardian financial abuse. The "Guarding the Guardians" publication also provides examples of exploitation and information on how to report suspected abuse.

Suspected signs of guardian financial abuse include:

 Using guardianship authority to transfer property for the guardian’s benefit.

 Receiving personal payments from a protected individual without court permission.

Authorizing frequent cash withdrawals from the protected individual’s accounts without explanation.

Using or borrowing property for personal benefit without court authorization.

 Making unexplained decisions that are not in the protected individual’s best interest.

Deputy Director McHenry asks anyone with suspicions of possible exploitation by guardians to contact the agency at 402-471-2171.

More information about the laws governing the securities industry in Nebraska can be found on NDBF’s website at ndbf.nebraska.gov. If you have questions about any investment matter, call NDBF’s Consumer Hotline toll free at (877) 471-3445 in Nebraska, or (402) 471-3445 if you are out of state.

Consumer Advisory - WEAAD

 

CONSUMER ADVISORY

Publication Date: Jun 8, 2018

NDBF ISSUES ADVISORY ON CRYPTOCURRENCIES AND ICOS

June 8, 2018 (LINCOLN, NEB.)  The Nebraska Department of Banking and Finance (NDBF) reminds investors to be cautious when investing in cryptocurrencies and initial coin offerings (ICOs). Recent enforcement actions by federal and other state regulators against ICOs and cryptocurrency-related investment products show that fraudulent activity involving these products poses a significant threat to Main Street investors.

"Fraudulent activity harms investors and legitimate businesses interested in taking advantage of the new technology. We urge investors to approach initial coin offerings or cryptocurrency-related investment product with extreme caution," NDBF Deputy Director Claire McHenry said.

To help investors understand the risks associated with investing in ICOs and cryptocurrency-related investment products, NDBF issued two new Informed Investor Advisories, "What to Know About ICOs" and "Be Cautious of the Crypto Investment Craze."

More information about the laws governing the securities industry in Nebraska can be found on NDBF’s website at www.ndbf.nebraska.gov. If you have questions about any investment matter, call NDBF’s Consumer Hotline toll free at (877) 471-3445 in Nebraska, or (402) 471-3445 if you are out of state.

 

Consumer Advisory - Cryptocurencies and ICOs
Informed Investor Advisory Cryptocurrency
Informed Investor Advisory ICO

Consumer Advisory

Publication Date: Apr 24, 2018

NDBF ISSUES ADVISORY ON FINANCIAL UNICORNS

April 24, 2018 (LINCOLN, NEB.) — The Nebraska Department of Banking and Finance (NDBF) is cautioning investors about pre-IPO investments in large privately held companies with supposed valuations of more than $1 billion, commonly referred to as "unicorns." Investing in unicorns is speculative and generally unavailable to retail investors.

 

NDBF is sharing an Informed Investor Advisory about financial unicorns. The advisory provides information and resources to help investors better understand "unicorn" companies. The advisory discusses the risks of investing in pre-IPO companies, including fraud, as well as disclosure, liquidity and valuation considerations.

 

The full advisory is available on the agency’s website here.

 

More information about the laws governing the securities industry in Nebraska can be found on NDBF’s website at www.ndbf.nebraska.gov. If you have questions about any investment matter, call NDBF’s Consumer Hotline toll free at (877) 471-3445 in Nebraska, or (402) 471-3445 if you are out of state.

Consumer Advisory - Unicorns

Informed Investor Advisory - Unicorns

Federal Regulatory Alert

Publication Date: Mar 23, 2018

The Federal Trade Commission issued a WESTERN UNION refund alert on March 22, 2018.  FRAUDSTERS are reportedly using official looking emails to collect information about your Western Union settlement.  FTC warns everyone, do not apply for a Western Union settlement refund on line, you must use the forms made available by the FTC.

If you lost money to scammers who had you pay using Western Union between January 1, 2004 and January 19, 2017, you can ask for your money back.

To learn more, follow the link to the Federal Trade Commission.

https://www.consumer.ftc.gov/blog/2018/03/western-union-refunds-scam-alert?utm_source=govdelivery

Consumer Advisory

Publication Date: Mar 1, 2018

Conversation Starters For Military Families

 

MARCH 1, 2018 (LINCOLN, NEB.) — This week is Military Saves Week, which encourages members of the military and their families to save money and build wealth.  The Nebraska Department of Banking and Finance (“NDBF”) proudly supports our service members and understands that they have unique challenges.

Military life changes quickly with deployments, relocations, promotions or changes in dependents. NDBF is issuing conversation starters to help military families prepare themselves to make safe and wise financial decisions. 

Budgeting

  • How much income goes toward fixed expenses (e.g. rent, insurance) versus flexible expenses (e.g. entertainment and investments)?
  • Have you created a financial plan to show where your money goes?
  • Have you taken advantage of military resources to help develop personal finance skills?
  • Are your family members aware of all financial accounts, bill deadlines, investments, etc. in case of deployment or an emergency?

Saving

  • What are your short and long-term financial goals (e.g. buy a home, start a family)?
  • Do you have an emergency fund for unexpected financial hardships?
  • How could you spend less and save more?
  • Are you aware of the special savings accounts and financial programs available to military personnel on deployment?

Investing

  • What are the risks and benefits of investing compared to saving?
  • What investments are appropriate now (e.g. securities, real estate, education)?
  • How do you balance immediate financial needs with long-term financial goals?
  • Do you understand basic investing strategies (e.g. diversification and dollar cost averaging)?
  • Who can help you make informed financial or investment decisions?
  • Are you taking advantage of all government-offered investment and retirement plans?

Scams and Frauds

  • How do you identify and report suspected fraud?
  • Where can you verify the background of financial professionals or firms?
  • How can you effectively monitor your investments?
  • How can you stay aware of current investment scams and fraud?

Additional information about Military Saves Week and a list of resources and events is available at www.militarysaves.org

 

More information about the laws governing the securities industry in Nebraska can be found on NDBF’s website at www.ndbf.nebraska.gov. If you have questions about any investment matter, call NDBF’s Consumer Hotline toll free at (877) 471-3445 in Nebraska, or (402) 471-3445 if you are out of state.

Consumer Advisory - Military Families Conversation Starters

CONSUMER ALERT

Publication Date: Feb 14, 2018

NDBF Announces New Resources and Tools for Choosing a Financial Professional

February 14, 2018 (Lincoln, Neb.)  — The Nebraska Department of Banking and Finance (“NDBF”) announced today a new resource, The Informed Investor Advisory: Financial Service Providers.  The advisory will help Nebraskans understand the different types of financial services providers, how to check out their background, and important questions to ask before signing a contract.

Nebraskans are also encouraged to check out a new online guide available at www.aarp.org/InterviewAnAdvisor that helps identify questions to ask before hiring a financial adviser.  Interview an Adviser is a free tool launched recently by AARP and the North American Securities Administrators Association (NASAA), of which the Department is a member.  The online tool does not require an AARP membership to use. 

“Many people would benefit from working with a financial professional.  It’s best to take the time and do your homework to understand the services they offer, their responsibilities to you, and what you will be paying.  However, many people don’t know where to start or what questions to ask,” says NDBF Deputy Director Claire McHenry.

The selection of any professional can be done best by following a step-by-step search process.  Check his or her credentials, experience, reputation and qualifications by using BrokerCheck.FINRA.org or contacting NDBF.  Identify your primary needs in seeking financial advice in order to evaluate each financial adviser you meet based on his or her ability to help fulfill those needs.  Ask a lot of questions to make sure the adviser is a good fit for you based on your financial situation and needs.  It is your responsibility and right to fully investigate the financial adviser's background, methods of practice, and credentials.

More information about the laws governing the securities industry in Nebraska can be found on NDBF’s website at www.ndbf.nebraska.gov. If you have questions about any investment matter, call NDBF’s Consumer Hotline toll free at (877) 471-3445 in Nebraska, or (402) 471-3445 if you are out of state.

Informed Investor Advisory Financial Service Providers
Choosing Advisers and Planners Consumer Alert

CONSUMER ALERT

Publication Date: Jan 11, 2018

NDBF Reminds Investors to Approach Cryptocurrency with Caution

January 11, 2018 (Lincoln, Neb.)  —  With cryptocurrencies continuing to attract headlines, the Nebraska Department of Banking and Finance (“NDBF”) today reminded Nebraska investors to be cautious about investments involving cryptocurrencies.

“Investors should go beyond the headlines and hype to understand the risks associated with investments in cryptocurrencies, as well as cryptocurrency futures contracts and other financial products where these virtual currencies are linked in some way to the underlying investment,” Deputy Director Claire McHenry said.

Cryptocurrencies are a medium of exchange that are created and stored electronically in the blockchain, a distributed public database that keeps a permanent record of digital transactions. Current common cryptocurrencies include Bitcoin, Ethereum and Litecoin. Unlike traditional currency, these alternatives have no physical form and typically are not backed by tangible assets. They are not insured or controlled by a central bank or other governmental authority, cannot always be exchanged for other commodities, and are subject to little or no regulation.

“The recent wild price fluctuations and speculation in cryptocurrency-related investments can easily tempt unsuspecting investors to rush into an investment they may not fully understand,” McHenry said. “Cryptocurrencies and investments tied to them are high-risk products with an unproven track record and high price volatility. Combined with a high risk of fraud, investing in cryptocurrencies is not for the faint of heart.”

Last month, NASAA identified Initial Coin Offerings (ICOs) and cryptocurrency-related investment products as emerging investor threats for 2018. Unlike an Initial Public Offering (IPO) when a company sells stocks in order to raise capital, an ICO sells “tokens” in order to fund a project, usually related to the blockchain. The token likely has no value at the time of purchase. Some tokens constitute, or may be exchangeable for, a new cryptocurrency to be launched by the project, while others entitle investors to a discount, or early rights to a product or service proposed to be offered by the project.

NASAA offers a short animated video to help investors understand the risks associated with ICOs and cryptocurrencies.
 

Cryptocurrency Concerns

Some concerns investors should consider before investing in any offering containing cryptocurrency include:

  • Cryptocurrency is subject to minimal regulatory oversight, susceptible to cybersecurity breaches or hacks, and there may be no recourse should the cryptocurrency disappear.
  • Cryptocurrency accounts are not insured by the Federal Deposit Insurance Corporation (FDIC), which insures bank deposits up to $250,000.
  • The high volatility of cryptocurrency investments makes them unsuitable for most investors, especially those investing for long-term goals or retirement.
  • Investors in cryptocurrency are highly reliant upon unregulated companies, including some that may lack appropriate internal controls and may be more susceptible to fraud and theft than regulated financial institutions.
  • Investors will have to rely upon the strength of their own computer security systems, as well as security systems provided by third parties, to protect purchased cryptocurrencies from theft.

Common Red Flags of Fraud

NDBF also reminds investors to keep watch for these common red flags of investment fraud:

  • “Guaranteed” high investment returns. There is no such thing as guaranteed investment returns, and there is no guarantee that the cryptocurrency will increase in value. Be wary of anyone who promises a high rate of return with little or no risk.
  • Unsolicited offers. An unsolicited sales pitch may be part of a fraudulent investment scheme.  Cryptocurrency investment opportunities are promoted aggressively through social media. Be very wary of an unsolicited communication—meaning you didn’t ask for it and don’t know the sender—about an investment opportunity.
  • Sounds too good to be true. If the project sounds too good to be true, it probably is. Watch out for exaggerated claims about the project’s future success.
  • Pressure to buy immediately. Take time to research an investment opportunity before handing over your money. Watch out for pressure to act fast or “get in on the ground floor” of a new tech trend.
  • Unlicensed sellers. Many fraudulent investment schemes involve unlicensed individuals or unregistered firms. NDBF can help investors research the background of those selling or advising the purchase of an investment.

More information about the laws governing the securities industry in Nebraska can be found on NDBF’s website at www.ndbf.nebraska.gov. If you have questions about any investment matter, call NDBF’s Consumer Hotline toll free at (877) 471-3445 in Nebraska, or (402) 471-3445 if you are out of state.

 

Consumer Alert - Approach Cryptocurrency With Caution

Consumer Alert

Publication Date: Dec 27, 2017

NDBF Announces Top Investor Threats

Promissory Notes, Real Estate Investments and Ponzi Schemes Top the List

December 27, 2017 (Lincoln, Neb.)  —  The Nebraska Department of Banking and Finance (“NDBF”) today released its annual list of top investor threats and reminded Nebraskans to use caution when approached with any unsolicited investment opportunities. “All investments involve a degree of risk. Investors can help protect themselves by taking time to research both the investment product and the person selling it. It’s best to learn about an investment before you lose money,” Deputy Director Claire McHenry said.

The top threats were determined by surveying members of the North American Securities Administrators Association, of which NDBF is a member, to identify the most frequently identified source of current investor complaints or investigations. The following were cited most often:

 

  • PROMISSORY NOTES: A promissory note is a written promise to pay (or repay) a specified sum of money at a stated time in the future or upon demand. Companies may sell promissory notes to raise capital, and usually offer them only to sophisticated or institutional investors. But not all promissory notes are sold in this way. Promissory notes from legitimate issuers can provide reasonable investment returns at an acceptable level of risk, although state securities regulators have identified an unfortunately high number of promissory note frauds. Investors should be cautious about promissory notes with durations of nine months or less, as these notes generally do not require federal or state securities registration. Such short-term notes have been the source of most (though not all) of the fraudulent activity involving promissory notes identified by securities regulators.
  • REAL ESTATE INVESTMENTS: The promise of earning quick money through investments related to real estate continues to lure investors. Investors should be cautious about real estate investment seminars, especially those marketed aggressively as an alternative to more traditional retirement planning strategies involving stocks, bonds and mutual funds. Two of the most popular current investment pitches at these seminars involve so-called “hard-money lending” and “property flipping.” Hard-money lending is a term used to refer to real estate investments financed through means other than traditional bank borrowing. Investors may be tempted by the opportunity to earn greater rates of return by participating on a hard-money loan and may (or may not) appreciate the potential risks. Property flipping is the practice of purchasing distressed real estate, refurbishing it, and then immediately re-selling it in hopes of earning a profit. Property flipping financed through borrowed funds or outside investments can be done entirely lawfully, but it can also be a source for fraud. A scammer may, for example, defraud potential investors in the flip by misrepresenting the value of the underlying property or its profit potential.
  • PONZI/PYRAMID SCHEMES: A Ponzi scheme (named after 1920’s swindler Charles Ponzi) is a ploy wherein earlier investors are repaid through the funds deposited by subsequent investors. In a Ponzi scheme, the underlying investment claims are usually entirely fictional; very few, if any, actual physical assets or investments generally exist. As the number of total investors grows and the supply of potential new investors dwindles, there is not enough money to pay off promised returns and cover investors who try to cash out. Similarly, a pyramid scheme is a fraudulent multi-level marketing strategy whereby investors earn potential returns by recruiting more and more other investors. Multi-level marketing strategies are not intrinsically fraudulent, and there are many legitimate multi-level marketing companies offering various consumer products and services. What makes a multi-level marketing strategy into a fraudulent pyramid scheme is the lack of a genuine underlying investment enterprise or product upon which the strategy can hope to be sustained.
  • OIL & GAS INVESTMENTS: Many oil and gas investment opportunities, while involving varying degrees of risks to the investor, are legitimate in their marketing and responsible in their operations. However, as in many other investment opportunities, it is not unusual for unscrupulous promoters to attempt to take advantage of investors by engaging in fraudulent practices. These investments may be marketed as safe and secure, high-yield investments and therefore attract investors, such as seniors, who are interested in safety of principal with some income-producing potential. Oil and gas ventures are typically highly speculative, though, and may not be suitable for many investors. Because these ventures are so speculative, the potential for fraud is rife. Scammers may misrepresent the likelihood that an oil or gas well will be successful – or may not even ultimately drill a well at all. Fraudulent oil and gas schemes frequently take the form of Ponzi schemes, with investors’ funds being “recycled” to keep the scheme going.
  • AFFINITY FRAUD: In an affinity fraud, a con artist uses some sort of connection with the victim as the basis for the fraud. Affinity frauds may involve people who attend the same church, belong to the same club or association, or share a common hobby. The con artist knows it is often easier for victims to trust someone who seems to be like them. And once trust is gained, it is easier to exploit that trust to perpetrate a scam. Once a victim realizes that he or she has been scammed, too often the response is not to notify the authorities but instead to try (usually unsuccessfully) to solve problems within the group. Affinity fraud can not only be financially devastating to the victims, but often has the perverse effect of causing victims to lose trust in the group or affiliation that was previously a source of comfort or support. The psychological damage can be just as harmful as the financial damage.

More information about the laws governing the securities industry in Nebraska can be found on NDBF’s website at www.ndbf.nebraska.gov. If you have questions about any investment matter, call NDBF’s Consumer Hotline toll free at (877) 471-3445 in Nebraska, or (402) 471-3445 if you are out of state.

 

Consumer Alert - Top Investor Threats

Investment Adviser Resources

Publication Date: Dec 19, 2017

NDBF IDENTIFIES COMPLIANCE, CYBERSECURITY RESOURCES FOR INVESTMENT ADVISERS

DECEMBER 19, 2017 (LINCOLN, NEB.) — The Nebraska Department of Banking and Finance (“NDBF”) draws attention to resources for its state-registered investment advisers available from the North American Securities Administrators Association (“NASAA”), of which it is a member.  At its annual conference in September, NASAA released two reports important to state-registered investment advisers.

The 2017 NASAA Investment Adviser Coordinated Examination Report provides information about more than 1,200 coordinated examinations of state-registered investment advisers by 37 state securities regulators, including NDBF.  The report identified the top three findings as books and records, registration, and contracts. In particular, examiners found problems with client suitability information, inconsistencies between Parts 1 and 2 of Form ADV, and problems with the fee description in the contract. These findings are consistent with Nebraska’s examination findings. 

The exam report identifies 10 best practices to assist investment advisers in developing compliance policies and procedures, including maintaining all required records, maintaining up-to-date suitability information, and reviewing the Form ADV annually.  NDBF reminds investment advisers that under new rules, NDBF is requiring all investment advisers to adopt and implement written policies and procedures reasonably designed to prevent violations of the Securities Act of Nebraska on or before June 5, 2018. 

During the coordinated examinations, state securities examiners also found nearly 700 deficiencies involving cybersecurity.  Cybersecurity is a key priority for NDBF and NASAA.  In February 2016, NDBF surveyed its state-registered investment advisers about their cybersecurity practices.  The survey found that all firms used passwords on computers used for advisory business and most had created some policies and procedures about cybersecurity. The survey also found that investment advisers could improve cybersecurity readiness by using stronger passwords, maintaining up-to-date anti-virus/anti-malware software and operating systems, and encrypting sensitive client data, particularly on mobile devices.  NDBF will conduct a similar survey in February 2018 to gather updated information and identify trends in cybersecurity practices in Nebraska.

NASAA also released a cybersecurity checklist to help state-registered investment advisers gauge their cybersecurity preparedness; identify, protect, and detect vulnerabilities; and respond and recover from cyber events.  Cybersecurity is a growing challenge, even for smaller firms, and NDBF encourages investment advisers to review the checklist and prepare for possible cybersecurity events.  

 

Resources for State Investment Advisors

Consumer Alert

Publication Date: Dec 5, 2017

The Nebraska Department of Banking and Finance has issued a Cease and Desist Order against Steve’s Payday Loans and its officers, directors, employees, and agents.  The Order prohibits Steve’s Payday Loans from deceptively claiming to be, and from operating as, a payday lender in Nebraska until the entity has obtained the required delayed deposit services business license in Nebraska.

NDBF Press Release - Steve's Payday Loans 12-5-2017

Steve's Payday Loans Cease and Desist Order

Federal Regulatory Alert

Publication Date: Nov 16, 2017

On November 13, 2017, the Federal Trade Commission issued a notice to consumers who lost money using Western Union services that they may be eligible for a refund.

If you lost money to scammers who had you pay using Western Union between January 1, 2004 and January 19, 2017, you can now ask for your money back.   

To learn more, follow this link to the Federal Trade Commission.

12/31/2017 RENEWAL DEADLINE

Publication Date: Nov 15, 2017

NDBF REMINDS INVESTMENT ADVISERS, BROKER-DEALERS OF DECEMBER 31, 2017 RENEWAL DEADLINE

The Nebraska Department of Banking and Finance (“NDBF”) reminds state-registered investment advisers, broker-dealers, and their agents and representatives that registrations in Nebraska expire on December 31, 2017.  Firms will need to assemble required documentation and review filings to make sure information is accurate and up-to-date.  Failure to submit filings or provide required information by the appropriate deadline will result in the termination of the registration on January 1, 2018.

State-registered investment adviser and investment adviser representative deadlines:

  • By December 22, 2017 – Submit Nebraska specific forms and documentation to NDBF
    (see requirements)
  • Before December 26, 2017 – Submit renewal payments through CRD/IARD
  • Before December 27, 2017 – Submit required electronic form filings through CRD/IARD

FINRA broker-dealer and agent deadlines:

  • Before December 26, 2017 – Submit renewal payments through CRD/IARD
  • Before December 27, 2017 – Submit required electronic form filings through CRD/IARD

Non-FINRA Broker-Dealers and agents must submit all required forms and documentation to NDBF
( see requirements) by December 22, 2017.