Investor Alerts and Advisories

Cease and Desist Order, Notice of Civil Penalty, and Notice of Right to Request a Hearing

Account takeover (ATO) fraud occurs when a bad actor gains unauthorized entry to an investor’s account, which enables them to conduct fraudulent financial transactions. They will often use compromised security information (e.g., logins and passwords) to access bank and brokerage accounts for the purpose of conducting illegal funds transfers, retail purchases, and trading activity. 

Findings of Fact, Conclusions of Law, Cease and Desist Order, Notice of and Order for Rescission, Notice of and Order for Civil Penalties, Notice of Reservation of Commissioner's Authority to Amend Order, and Notice of Right to Request a Hearing

Findings of Fact, Conclusions of Law, and Final Order

Findings of Fact, Conclusions of Law, Cease and Desist Order, Notice of and Order for Rescission, Notice of and Order for Civil Penalties, Notice of Reservation of Commissioner's Authority to Amend Order, and Notice of Right to Request a Hearing

One of the best ways to build wealth is by saving and investing over a long period of time. The earlier you start, the easier it is for your money to grow. Opening your first investment account is a key step in beginning your investment journey. Here are some important investment tips from the North Dakota Securities Department to consider when opening any investment account.

With advances in technology including more enhanced digital experiences that blur the line between the physical and digital worlds, the future has arrived in the form of the “metaverse.” A series of virtual worlds, the metaverse is the latest technology that offers new ways to interact and collaborate, and with that, new ways to perpetrate financial scams and investment fraud. This alert highlights some current metaverse investment scams and provides tips for investors to protect themselves.

With stock market volatility dominating Main Street news headlines since early 2020, interest in investing has seen a dramatic increase. According to Bloomberg News, downloads of investment apps rose by 20% in 2021 from the year prior while actual time spent on these apps jumped by 90%. Most Millennials and Gen Z-ers are using social media sources for information about investing rather than relying on more traditional sources of investing information such as brokerage or investment advisory firms, or regulatory agencies.

Influencers have taken notice, and social media has become more saturated with financial content than ever before, leading to the rise of the financial influencer, or “finfluencer.” Viral videos claiming that an investment opportunity will “go to the moon this year!” have proliferated, as have social media postings promoting easy plans for paying off your house, car, or student loan debt using language such as “Five easy tricks to financial freedom.”

This investor advisory explains what financial influencers are, how they are compensated, what you should keep in mind when you are exposed to financial influencers’ content, red flags to watch out for, and resources available to you.

Promissory notes can be appropriate investments for certain investors. However, promissory notes that are sold broadly to individual investors are often scams and are a leading source of investor complaints received by securities regulators.

Cease and Desist Order, Notice of Civil Penalties, Order for Rescission, and Notice of Right to Request a Hearing

A private placement is a securities offering that is not required by law to be registered with federal or state securities regulators. Private placements allow companies to sell stocks, bonds, or other securities to investors without completing the rigorous disclosures necessary in a registered offering.

Findings of Fact, Conclusions of Law, Order to Summarily Suspend Investment Adviser Registration, Notice of Proposed Order to Revoke Investment Adviser Registration, Cease and Desist Order, Notice of Civil Penalties, Order for Rescission, Notice of Reservation of Commissioner's Authority to Amend Order, and Notice of Right to Request a Hearing

Stop Order Summarily Suspending the Offer and Sale of Federal Covered Securities, Cease and Desist Order, Notice of Civil Penalties, and Notice of Right to Request a Hearing

With interest rates on the rise, more investors may be considering an investment in bonds or bond funds, and in researching alternatives or talking to a financial adviser, may have come across bond credit ratings.  Credit ratings usually appear in the form of alphabetical letter grades (for example, ‘AAA’ and ‘BBB’) and are an estimate of the relative level of credit risk of a bond, company or government.  Credit ratings are issued by third parties and are not an assessment by the issuer of the bond or by securities regulators.

Credit ratings can be useful when evaluating an investment.  But when considering credit ratings, you should understand their limitations.  You should not base your investment decision solely on a credit rating or treat a credit rating as if it were investment advice.
 

In recognition of World Elder Abuse Awareness Day on June 15, the North Dakota Securities Department reminds financial professionals and the public throughout North Dakota to be on the lookout for signs of elder financial abuse.

Governor Burgum Issues Proclamation Recognizing World Elder Abuse Awareness Day on June 15.

Many investors are becoming more conscious of whether a company in which they are investing has considered environmental, social and governance (ESG) factors. This is resulting in an investor-driven push to get corporate managers to pay greater attention to ESG issues. Some corporations are responding by altering their management philosophies and business plans.

Don't get swept away by a romance scam.

Dating apps and social media platforms may be a popular way to meet new people, but be cautious if someone turns an online romance into an opportunity to solicit an investment or asks to borrow money. Scammers are increasingly posing as potential romantic partners to lure people into fraudulent investment schemes. This alert discusses common tactics fraudsters use in investment-related romance scams and gives you steps to take to protect yourself from these schemes.

In our digitally connected world, some investors turn to online chatrooms and social media platforms for information about investing or specific investment opportunities.  And with today’s trading technology, it’s easy to go from zero to invested in a matter of minutes.  Phone apps can turn inexperienced investors into day traders, and online investment chat forums make it easy to use these sources for investment advice rather than relying on the services of a registered investment professional. While ever-evolving financial technology innovation makes investing more accessible to greater numbers of people, investors must understand the risks created when financial innovation and social media intersect. 

The relationship you have with your investment professional is a key element to meeting your long-term financial goals.

If your stockbroker or investment adviser representative leaves his or her employer, you should make sure that you understand how and why it happened. It could be as simple as a move to another city or retirement, but there could be other reasons too. It is critical to find out what happened before deciding who will help you with your investments going forward. After all, it’s your money and your financial future.

Crypto assets, including cryptocurrencies, stablecoins, tokens, and other digital assets have been of increasing interest to individual investors over the last few years.  This Investor Advisory highlights the risks that may be involved in a new financial product related to crypto assets—an interest-bearing account for crypto asset holdings. 

The North Dakota Securities Department has released its annual list of top investor threats and urges caution before purchasing popular and volatile unregulated investments – especially those involving cryptocurrency and digital assets.  Along with the list of top investor threats, the Department also provides guidance for investors, including steps to take to protect against fraud in the new year. 

As part of its ongoing effort to raise investor awareness, the North Dakota Securities Department has issued an investor advisory discussing Decentralized Finance (DeFi), a relatively new blockchain-based set of financial products and services.

In a combined effort to provide additional protection for investors, FINRA and the North American Securities Administrators Association (NASAA), of which the North Dakota Securities Department is a member, have announced a new campaign urging investors to provide their financial firms with a trusted contact. The U.S. Securities and Exchange Commission’s Office of Investor Education and Advocacy (SEC OIEA) is also collaborating on this initiative. 

Mutual funds and exchange traded funds (ETFs) offer investors a cost-efficient way to invest in professionally managed portfolios of securities. While it is often tempting to make a purchase based on a fund’s historical performance, informed investors know that past performance is no guarantee of future performance, and that they must review a fund’s prospectus, shareholder reports and portfolio holdings to see if the fund’s risk/return profile aligns with theirs. An informed investor will pay particular attention to a fund’s expense ratio, which, over time, can eat into a fund’s earnings significantly.

BISMARCK, ND  (June 17, 2020) –  The Securities Department is issuing this notice to inform franchisors and their counsel that the Department will be following the guidance recently issued by the NASAA Franchise Project Group regarding historical financial performance representations (“FPRs”) in light of the fact that the COVID-19 pandemic has significantly impacted many franchise systems.

In the Matter of: Electronic Filing of Securities Registration Applications, Notice Filings, and Exemption Filings.

WASHINGTON, D.C. (May 8, 2020) – The North American Securities Administrators Association (NASAA) today announced the availability of a new publication designed to improve the quality of franchise disclosures.

The 366-page Franchise Disclosure Document Handbook: A Resource Guide for Preparing a Franchise Disclosure Document is a compilation of the various rules, commentaries, and guidance from the Federal Trade Commission and NASAA governing the preparation of Franchise Disclosure Documents.

***PLEASE NOTE:  THIS ORDER HAS BEEN REVISED EFFECTIVE JUNE 8, 2020***

In the Matter of: Electronic Filing of Securities Registration Applications, Notice Filings, and Exemption Filings.

ORDER MANDATING ELECTRONIC FILINGS

Bismarck ND –  Amid the ongoing COVID-19 pandemic, securities regulators continue to urge investors to be on guard against an anticipated surge of fraudulent investment schemes.

Bismarck ND –  Amid the ongoing COVID-19 pandemic, securities regulators continue to urge investors to be on guard against an anticipated surge of fraudulent investment schemes.

EMERGENCY NOTICE No. 2020-03      |      April 2, 2020

Temporary Relief from Notary Attestation for Registrants and Other Filers Affected by the COVID-19 Outbreak Granted by the Commissioner under N.D.C.C. § 10-04-03(2)

The North Dakota Securities Commissioner understands that registrants and other filers may not be able to obtain notary attestation at this time.

I. Relief from Requirement to Obtain Physical Signatures on Forms U4

II. Relief from Annual Update Filings and Document Delivery Requirements by State-Registered Investment Advisers

Affinity fraud is a fraudulent financial scheme that involves a scammer who is or appears to be part of a community or interest group. The scammer builds trust within the group, and exploits that trust to push fraudulent, non-existent, and too-good-to-be-true investments on other members of the group.

Initial Coin Offerings (ICOs) are attracting investors interested in new trends in technology investing. Regulation of ICOs is evolving and complex.

Cryptocurrencies burst into the investing mainstream in 2017 as the values of some virtual coins and tokens skyrocketed, led by Bitcoin. Mainstream media now feature daily coverage of new cryptocurrencies, coin exchanges, and related investment products.

Bismarck, ND, January 4, 2018 — With cryptocurrencies continuing to attract headlines, Securities Commissioner Karen Tyler today reminded North Dakota investors to be cautious about investments involving cryptocurrencies. 

In an effort to stimulate the U.S. economy through job creation and capital investment by foreign investors, the U.S. Congress in the early 1990s authorized the creation of a new type of immigrant visa known as the Employment-Based, Fifth Preference (EB-5) visa.

Escheatment is a process whereby the government takes ownership of property, including financial assets, that has been deemed abandoned by the property’s rightful owner. Escheatment of financial accounts typically occurs after a period of account-related dormancy (or “inactivity”) and after attempts to identify and contact the account owners have failed.

The Jumpstart Our Business Startups (JOBS) Act, a series of legislative provisions intended to facilitate capital formation in the United States, was signed into law in 2012. This legislation included the CROWDFUND Act, which made significant changes to current federal and state securities laws. The CROWDFUND Act allows entrepreneurs to raise capital by offering to sell interests in their businesses over the Internet. Under the CROWDFUND Act, a small business is allowed to raise $1 million in a 12-month period by selling its securities to investors without registering that offering with federal or state securities regulators. However, the Act places limitations on how and to whom a small business can sell its securities. In May 2106, the Securities and Exchange Commission (SEC) issued rules to implement this new exemption to allow securities sales through crowdfunding.
 

The Internet has become an inexpensive and easy way for individuals and businesses to raise money. In 2012, Congress passed the JOBS Act, which directed the Securities and Exchange Commission (SEC) to formulate rules to exempt equity crowdfunding from the securities registration laws.  These rules went into effect in May, 2016 and removed restrictions on start-up companies that use the internet to find investors.   

The Securities and Exchange Commission’s Office of Investor Education and Advocacy is issuing this Investor Bulletin to help investors understand Master Limited Partnerships, or MLPs.  Because investing in an MLP may be unfamiliar, investors should carefully consider potential benefits – and risks – before making an investment decision.

A pension is a type of retirement plan, usually tax-exempt, in which an employee makes contributions toward a pool of funds set aside for an employee’s future benefit. The pool of funds is invested on the employee’s behalf, allowing the employee to receive benefits upon retirement.

• Are you earning a pension from your employer and need cash fast?
• Are you an investor looking for new ways to grow your investment dollars?

If you answer yes to either question, you may be the target of a new wrinkle on an old type of scam.

Victims of investment scams are wise to use caution if approached by companies promising to help them recover their lost investment funds and bring the perpetrators to "justice."  A third-party asset recovery company is a company that charges a fee to assist individuals in recovering money lost in scams.  The company claims to gather information on the scam and assist the individual in recovering lost investment dollars.  Many of these self-proclaimed recovery companies are not law firms, although they may advertise that they can provide legal assistance.  Typically, the targeted investors have lost thousands of dollars, perhaps even their entire life's savings, to fraudulent investment schemes.

Bismarck, ND -- North Dakota Securities Commissioner Karen Tyler has ordered Kevin D. Wanner, CRD# 1402627, a Bismarck securities and insurance agent, doing business under the trade name, Precision Financial Services, to Cease and Desist from selling fictitious Certificates of Deposit...

The SEC’s Office of Investor Education and Advocacy is issuing this Investor Bulletin to educate investors about exchange-traded notes (“ETNs”).  ETNs are unsecured debt obligations of financial institutions that trade on a securities exchange.  ETN payment terms are linked to the performance of a reference index or benchmark, representing the ETN’s investment objective.

The SEC's Office of Investor Education and Advocacy is issuing this bulletin to educate investors about variable annuities and how they work. Variable annuities are complex products, and this Investor Bulletin focuses solely on the basics. For more in-depth information about variable annuities, see our companion publication, Variable Annuities: What You Should Know.

At first glance, marijuana, binary options, and digital currency appear to have no real connection to one another.  But what they all have in common is their recent emergence as three investments that both sellers and buyers hope will become the "next big thing."  Before you consider investing, make sure you understand what these products are, their benefits, and their risks.  

North Dakota Securities Commissioner Karen Tyler has ordered Paul De Bastos and North Dakota Bakken Connection LLC (NDBC) to Cease and Desist from selling unregistered securities, acting as an unregistered broker-dealer or agent, and engaging in fraudulent practices in connection with the offer and sale of securities.

North Dakota Securities Commissioner, Karen Tyler, today issued an advisory reminding investors to be cautious when considering investing in three products recently making news: marijuana-related investments, binary options and digital currency. The advisory is on the North Dakota Securities Department’s website at www.nd.gov/securities.

The SEC’s Office of Investor Education and Advocacy is issuing this Investor Alert to provide investors with important steps to take regarding their investment accounts if they become victims of identity theft or a data breach.

The SEC’s Office of Investor Education and Advocacy is issuing this bulletin to educate investors about investing in non-traded REITs

Report Indicates Seniors Remain a Top Target for Cons

Savvy consumers know it is important to compare prices on similar products to get the best value for their money. Wouldn’t it be nice if the same were true when shopping for a broker-dealer firm to know which is best for you. 

The SEC’s Office of Investor Education and Advocacy and the CFPB’s Office for Older Americans are issuing this bulletin to help investors and consumers understand the potential impact of diminished capacity on their ability to make financial decisions and to encourage investors and consumers to plan for possible diminished financial capacity well before it happens.

The SEC’s Office of Investor Education and Advocacy (OIEA) and the Financial Industry Regulatory Authority, Inc. (FINRA) are issuing this alert to provide investors with a general overview of automated investment tools.

The advisory includes tips to help investors recognize a high-yield investment program and offers steps investors should take to protect themselves from these scams.

This advisory issued is help investors separate fact from fiction regarding the responsibilities of third-party custodians of self-directed individual retirement accounts (IRAs) and other qualified plans. 

North Dakota Securities Department ISSUES INVESTOR ADVISORY ON VIRTUAL CURRENCY
It pays to know what’s in your e‐Wallet

Robert H. Medhus, a former securities broker who defrauded 18 clients of over $900,000 in a Ponzi-like scheme was sentenced to ten years in prison by Judge Frank Racek today in Fargo’s East Central District Court.

Financial professional titles and licenses are not the same.  A financial professional may use various titles whether or not he or she is registered or licensed with a regulatory authority.  Financial professionals that are registered as a broker-dealer or investment adviser have obtained registrations and licenses granted by federal or state regulatory authorities.  Working with a financial professional who is registered with or licensed by federal or state authorities affords you certain legal protections.

With energy demands and a desire for energy independence increasing globally, investments in traditional and alternative energy resources are being promoted more often and are becoming attractive to more investors. Some examples include: wind turbines, solar panels, biodiesel, ethanol, coal, oil, gas, hydrogen, wave, geothermal, oil sands, and liquefied natural gas. Many of these investments are highly risky and are usually not appropriate for all investors. It is not unusual for unscrupulous promoters to follow the headlines and take advantage of unsuspecting investors by engaging in fraudulent practices.

Promoters sometimes prey on investors interested in socially responsible products by labeling them as “green energy” investment opportunities. The phrase “green energy” implies that the products are ecologically friendly when in fact the promoters may be operating a fraudulent shell company and not producing anything.

Whether you are just starting a retirement fund or need additional help with growing and managing your money, you may benefit from selecting an investment services professional. Finding a person who is knowledgeable, affordable, and trustworthy may be a challenging process. This advisory provides basic information on three types of financial services professionals and their obligations to you as a client: broker-dealer agents, investment adviser representatives, and financial planners. An individual professional can hold any of these three credentials or titles, among others.

Bismarck, ND - Robert H. Medhus, a former securities broker, has been criminally charged with securities fraud, the sale of unregistered securities, and theft of property.

Exchange Traded Funds (ETFs) have grown increasingly popular among retail investors seeking safe, stable alternatives to mutual funds.

Before investing in an ETF, ask yourself these questions: Do I understand this investment? Is this investment right for me?

Many of the products that claim to achieve these objectives are called "nutraceuticals," a term used to describe dietary
supplements and food and drink products that contain additives purporting to provide health benefits. While some of the companies producing these products are legitimate, others could be bogus operations with the potential to harm unsuspecting investors.

The Internet has become an inexpensive and easy way for individuals and businesses to raise money for their activities. Congress recently passed the JOBS Act, which directs the Securities and Exchange Commission (SEC) to create rules exempting crowdfunding from the securities registration laws. Once implemented these rules will remove restrictions on start-up companies seeking investors over the Internet. Investors should be on the lookout for unscrupulous issuers and intermediaries who may attempt to engage in crowdfunding before the rules are written or misuse crowdfunding to steal from investors through false and misleading representations.

Historically speaking, the value of gold-related investments fluctuates even more than the stock market. Gold often moves in reverse of stocks and bonds, so when stocks are down, gold seems like a very tempting investment. Before jumping onto the gold bandwagon, there are a few things you might want to consider.

Social Networking in the Internet age allows people to connect to one another more quickly and easily than ever before. Investment promoters increasingly are logging on to find investors...and their money.

Before investing through a social network, ask yourself these questions: Have I verified that the promoter is legitimate? Do I understand the risks of the investment?

Bismarck, ND - Robert H. Medhus, a former securities broker, has been criminally charged with securities fraud, the sale of unregistered securities, and theft of property.