Blotter
Misleading the Military:
NASD fined two Fidelity b/ds $400,000 for preparing and distributing misleading sales literature that promoted Fidelity's Destiny I and II Systematic Investment Plans, which were primarily sold to U.S. military personnel.
Issuance and sales of new systematic investment plans (also known as periodic payment plans), which typically require investors to make a fixed number of monthly payments over a 10- to 15-year period, were prohibited by Congress last fall. Previously sold plans remain in force.
In one example of the sales literature violation, the two b/ds distributed sales literature entitled Time is Money that included misleading performance claims about the Destiny plans. The brochures claimed the plans had significantly outperformed the S&P 500 Index over a 30-year period, masking the fact that the plans had dramatically underperformed the index over the last 15 years.
James Shorris, SEC head of enforcement, said the Fidelity Destiny Plans were sold using various performance charts and data that presented a misleading picture of the plans' performance. “These failures were aggravated by the fact that the plans were primarily sold to military personnel, who often have limited time to study the marketing materials for investment products.”
The SEC Doesn't Like Promises:
The SEC issued cease-and-desist orders in May against Donald Lakin and Lawrence Campbell, two brokers from California, for using high-pressure sales tactics to offer and sell securities issued by Sunrise Energy through unregistered transactions. Between November 2001 and July 2003, the Division of Enforcement alleges Campbell and Lakin cold called hundreds of prospective investors, misrepresenting to them that Sunrise securities were low-risk investments with projected returns ranging from 55 percent to 112 percent per year. Ultimately, investors lost 95 percent of their money, according to the SEC; Campbell and Lakin received $162,000 and $374,000, respectively, in ill-gotten gains from the sales.
Indiana is NOT a Haven for Criminals:
A Lake County, Indiana man was sentenced to five years in prison, 10 years probation and will pay $500,000 restitution for securities fraud. Elber Elliot, founder of the Worldwide Gold Emporium, advertised to investors throughout the U.S. that he sold commodities, including gold, silver and platinum. But Elliot merely took the money and deposited it his own accounts, taking care to periodically reassure investors with phony statements about their investments. Elliot pocketed $538,176 from investors across the U.S. “We're simply not willing to let scam artists use Indiana as a haven for criminal activity,” said Secretary of State Todd Rokita, in a statement.
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