Securities regulators in 20 states, including Washington, have begun a crackdown against 14 brokerage firms accused of making unauthorized stock trades and other fraudulent sales practices.
“They’re very impressive when they talk to you on the phone. Like a brother. They get you to feeling very comfortable with them,” said Billy Hellums, of Roswell, N.M., who lost about $1,500 and was on the verge of investing much more.
Hellums and three other victims of allegedly abusive telemarketing practices by brokers came to Manhattan Thursday to attend a news conference at New York Attorney General Dennis Vacco’s office announcing the crackdown.
Vacco filed civil actions against the firms, charging them with high-pressure calling techniques as well as outright lies; sales practice abuses in which unlicensed solicitors falsified records and conducted unauthorized trades; failing to report investor complaints and evasion of broker-dealer registration requirements.
Vacco was joined by New Jersey Attorney General Peter Verniero and Mark Griffin, president of the North American Securities Administrators Association.
NASAA, a private organization representing state securities regulators, helped lead the investigation into the fraudulent stock telemarketing that resulted in Thursday’s announcement.
“In this highflying bull market,” Griffin said, “it’s easy for swindlers to make claims of outrageous returns sound plausible.”
“Unfortunately, far too many investors are falling for the lure of this latest trend in boiler room scams. And the telemarketers, playing upon people’s desire for ever-greater financial returns, have been running away with millions of dollars of hard-earned money.”
Brokers at Investors Associates Inc., based in Hackensack, N.J., allegedly absconded with about $60,000 belonging to Helen Sprecher, 85, of Philadelphia. The money represented 90 percent of the money saved by Mrs. Sprecher and her husband from a neighborhood grocery store they owned for 40 years.
Mrs. Sprecher said her troubles began when her regular broker took ill and she was contacted by another agent. “He sounded like a nice, friendly grandfatherly man,” she said.
Investors Associates’ outside counsel, David Sayid, said the company had no immediate comment.
Like Mrs. Sprecher, many victims were senior citizens, Griffin said, and many complaints involved low-priced shares of high-risk stock.
Other New York City brokerage firms named by Griffin were First United Equities, LT Lawrence & Co. and Meyers Pollack Robbins. First United President Douglas Traynor had no comment. The other two firms did not immediately return messages seeking reaction.
Hellums, a New Mexico building contractor, said he invested his money with a broker from the Uniondale, N.Y.-based Sterling Foster brokerage firm. The company did not return a phone call seeking comment.
Vacco said he had filed civil actions against First United and Investors Associates. Sixteen states have taken action against Investors Associates, including New Jersey, which has moved to revoke the firm’s registration to do business in the state.
The 20 states participating in the crackdown are: Alabama, Connecticut, Delaware, Illinois, Indiana, Maryland, Massachusetts, Missouri, New Hampshire, New Jersey, New Mexico, New York, Ohio, Oklahoma, Pennsylvania, Texas, Utah, Vermont, Washington and Wisconsin.
California, Georgia and Florida are expected to announce similar actions against broker-dealer firms in the next month.