October 5, 2001 -TALLAHASSEE – With Tuesday's interest rate cuts by the Federal
Reserve  pushing yields on fixed investments such as certificates of deposit and bonds 
to their lowest levels in years, Florida securities regulators today issued a list of the 
“Top Five” investments to be wary about. 

With many investors, particularly those who are dependent on interest income, 
worried by volatile stock markets and the terrorist attacks on the World Trade 
Center buildings and the Pentagon, Florida regulators warned against investing 
in bogus promissory notes, viaticals, exotic offshore investments and other 
high-risk or fraudulent investments promising high returns. 

'When evaluating an investment, you should remember that risk and reward go 
together,' said Don Saxon, Director of the Florida Department of Banking and 
Finance (DBF), Division of Securities. 'If someone is promising you high returns 
with no risk, be very, very skeptical, ask lots of questions and get it in 
writing.'

Here is a list of the five investments, ranked roughly in order of concern or 
prevalence: 

1. Promissory notes.  Promissory notes are short-term debt instruments. Investors 
should stay away from notes promising high returns – upwards of 12 percent 
monthly – from little-known companies. Many of these high-risk notes are sold by 
independent insurance agents, state regulators warn. In Indiana, 18 elderly 
investors lost nearly $1.4 million in a promissory note scam. An 80-year-old 
woman lost her life savings of $324,000. Although praying with their victims to 
gain their trust, the perpetrators diverted their money to offshore bank 
accounts and used it to make first-class business trips to China, India and 
Greece and buy expensive cars. 

2. “Callable” CDs.  Older investors beware: these higher-yielding certificates of 
deposit, while appropriate for some, won't mature for 10- to 30-years, unless 
the bank, not the investor, “calls,” or redeems, them. Redeeming the CD early 
may result in a substantial loss – upwards of 25 percent of the principal. In 
Iowa, a retiree in her 70s invested over $100,000 of her 97-year-old mother's 
money in three callable CDs with 20-year maturities. Her intention, she told her 
broker, was to use the money to pay her mother's nursing home bills. State 
regulators say sellers don't always disclose the risks and restrictions of 
callable CDs. 

3. Internet stock pitches.  Con artists frequently use the wide reach and 
relative anonymity of the Internet to “pump and dump” stocks in little-known 
companies, often claiming tragic events such as last month's terrorist attacks 
on the World Trade Center buildings and the Pentagon will push up the stock 
price. Many states have Internet surveillance programs that watch for fraud or 
investigate investor complaints. State securities regulators urge investors to 
ignore anonymous financial advice on the Internet and in chat rooms. 

4. Prime bank schemes.  Scam artists, often operating over the internet, promise 
investors returns as high as 300 percent through access to the investment 
portfolios of the world's elite banks. Purveyors of these schemes often target 
conspiracy theorists, promising access to the “secret” investments used by the 
world's wealthiest families. In North Dakota, state securities regulators say a 
small group of salesmen, including a local pastor, used religion and family ties 
to bilk investors out of $2 million in a prime bank scam. 

5. Viatical settlements.  Originated as a way to help the gravely ill pay their 
bills, these interests in the death benefits of terminally ill patients are 
always high risk and sometimes fraudulent. It works like this: a gravely ill 
person sells his or her life insurance policy to a viatical broker for between 
40 percent and 80 percent of the face value. The broker then sells the policy to 
a pool of investors, with an estimate of when the insured will die. Investors' 
profits quickly dwindle if the insured fails to die “on time.” In a new twist, 
state regulators say “senior settlements” – interests in the death benefits of 
healthy older people – are now being offered to investors as “safe and 
guaranteed” alternatives to CDs and other fixed investments. 

Before purchasing any investment, the DBF urges investors to ask the following 
questions: 

Does the investment meet your personal investment goals?  Whether you are 
investing for long term growth, investment income or other reasons, an 
investment should match your own investment goals; 

Are claims made for the investment realistic?  Some things really are too good to 
be true. Use common sense and get a professional, third party opinion when 
presented with investment opportunities that seem to offer unusually high 
returns in comparison to other investment options. Pie-in-the-sky promises often 
signal investment fraud; 

Has the seller given you written information that fully explains the investment? 
Make sure you get proper written information, such as a prospectus or offering 
circular, before you buy. The documentation should contain enough clear and 
accurate information to allow you or your adviser to evaluate and verify the 
particulars of the investment; and 

Are the seller and investment licensed and registered in your state? Call your 
state securities regulator to find out. If they are not, they may be operating 
illegally. To get the name and number of your state regulator visit 
www.nasaa.org or look in the white pages of your telephone directory under 
“government.” 

Consumers can check out investments and investment sellers by calling the DBF 
hotline at 1-800-848-3792.