Department of Financial Institutions
Investors Must Stay Wary During Economic Turmoil

Press Release Date:  Friday, October 03, 2008  
Contact Information:  Kelly May, Public Information Officer
502-573-3390 x252
800-223-2579 x252

   FRANKFORT, Ky. (Oct. 3, 2008) – The Department of Financial Institutions (DFI) today cautioned Kentucky investors against making sudden and uninformed decisions amid the ongoing market volatility and unprecedented turmoil on Wall Street.

   “With the current economic situation, DFI is concerned that securities swindlers and unscrupulous individuals will promote various investment schemes with promises of big returns,” said DFI Commissioner Charles Vice. “If history is any guide, these investments could be worth less than the paper on which they are written.”

   Con artists develop “professional” images that are often difficult to distinguish from a legitimate broker or investment adviser. They prey on investor fears of a changing market by offering investments that “just can’t lose.”

   “We know from past experience that con artists follow the headlines to prey on the worries and fears of everyday investors,” said James Strode, director of DFI’s Securities Division. He urged investors to make thoughtful, informed decisions about their long-term financial holdings and to seek the advice of a trusted investment professional before making any sudden moves with their money.

   “Investors should be especially wary of unsolicited financial advice or investment opportunities,” Strode said. “Investors should resist the temptation to make hasty decisions about their investments and take the time to thoroughly research new opportunities.”

   DFI offers the following tips for investors:

  • Contact DFI at 800-223-2579 or with any questions about an investment firm, professional or product. Make sure both the seller and the product are licensed and registered; otherwise, they may be illegal.
  • Use common sense. Some things really are too good to be true. Get a professional, third-party opinion when presented with investment opportunities that offer unusually high returns in comparison to other investment options.
  • Request written information that fully explains the investment, such as a prospectus or offering circular. The documentation should contain enough clear and accurate information to allow you or your financial adviser to evaluate and verify the particulars of the investment.
  • If you participate in an employer-sponsored retirement plan, get unbiased advice and guidance before making any significant changes to your long-term strategy.

   Also, remember that the Securities Investor Protection Corporation (SIPC) maintains a special reserve fund to help investors at failed brokerage firms. SIPC acts as trustee, or works with the court-appointed trustee, in a brokerage insolvency case to recover funds. In addition, rules of the U.S. Securities and Exchange Commission require registered broker-dealers to maintain net capital to provide financial resources so that customers may get some of their cash and securities back if the firm fails.

   “There are no guarantees in investing,” said Vice. “However with careful planning and research, investors can ride out the current market vagaries. And some who wait patiently may be rewarded with returns when the market recovers.”

   DFI is an agency in the Public Protection Cabinet.  It supervises the financial services industry by examining, chartering, licensing and registering various financial institutions, securities firms and professionals operating in Kentucky. DFI’s mission is to serve the public through effective and efficient regulation that promotes consumer confidence and economic growth. DFI is responsible for protecting Kentucky investors from financial predators and investment fraud through enforcement of the state’s securities laws.