This article by Caleb Larkin appeared in the Ogden Standard Examiner on June 8, 2015:
SALT LAKE CITY – The Securities and Exchange Commission (SEC) in Salt Lake City reports Utahns tend to invest in Ponzi and other financial fraud schemes at a higher rate than most states.
The SEC has 12 office locations nationwide that cover multiple states. Most offices appear in financial centers and cover a huge population. So why does Utah get its own dedicated office?
Karen Martinez, the regional director for the Salt Lake City SEC office, explained it may have to do with the historical significance of the site. “Salt Lake used to have an exchange, as a mining and railroad capital. That’s when the SEC office was created,” Martinez said.
However she also noted other offices have become obsolete, such as Seattle. Utah’s office may still be operating because of a higher need in the area.
The SEC enforcement office in Salt Lake City most often handles investor fraud cases. “Primarily our goal is investor protection,” Martinez said.
She acknowledged Utah has a large number of fraud cases they handle, specifically affinity fraud. Affinity fraud refers to investment scams that take advantage of specific social groups, religious affiliations, races, or ethnicities. One example of affinity fraud in Utah involved a deaf scammer who targeted deaf investors.
“Utahns tend to be a close-knit community,” Martinez said. “Unfortunately we tend to be very trusting of those who share common traits with us.”The Salt Lake office even handles out of state affinity fraud cases because of their experience as well as the fact that investors can live all over the country.
Cheryl Mori, Martinez’s senior advisor, highlighted Roger Bliss’ case filed in February. Bliss, from Bountiful, told investors he was making a 600 percent increase each year trading Apple stock. He offered investors 50 percent on the profit returns. Members of his “investment club” simply looked at his affluent standing, his nice car, his family, and his church attendance to make a judgment.
“You know if that the little voice inside your head says this is too good to be true, it is almost always right!” Martinez said. Bliss lost more than $3 million trading. He retained almost nothing for investors to reclaim by the time they brought the case to the SEC.
Martinez explained they try to move quickly on large cases to freeze assets and save investors’ funds. However most fraudulent investment advisors burn through funds before the case reaches the SEC. The SEC’s Office of Investor Education creates public awareness on different investor topics to protect Utahns before they succumb to such schemes.
The SEC in Salt Lake City files between 20 and 25 cases each year. Most claims average $25 million in fraudulent damages. Martinez explained many of the tips from investors will lead to quick resolutions from a simply phone call. Most long-term cases the Salt Lake office deals with focus on bribery investigations. A common issue is US companies bribing foreign government officials for a favorable business standing in their country. The SEC, however, also handles many ongoing, non-public, cases.
“We are getting more and more focused on investment advice for retirees,” Martinez said.
She explained the increased focus on retirement funds leads to bad advisement on retirement investments. One specific example she noted is with military and government employees. Brokers often offer bad investment advice to this group or fail to give full disclosure.
Charges range from interface fraud, as the most severe, to technical violations such as failing to register a security. A security in financial terms refers to a mutually beneficial agreement to trade financial assets. Some charges require proof of “intent to deceive.” Others are negligence based charges that come about when a broker fails to make all materials known or didn’t perform their due diligence.
Utah’s trusting culture puts investors at a disadvantage. Martinez believes “Utahns need to be vigilant. They need to do their homework. They need to research the individuals who offer investment advice.”