November 2010 "What Can You Do When Your Investments Tank?"

PLANNING FOR WEALTH & SECURITY

By Attorneys Jennifer and Jeff Hawkins

WHAT CAN YOU DO WHEN YOUR INVESTMENTS TANK?

Enron, Worldcom, the Global Recession, and Alanar are buzz words that have occupied national, international, and local media for the past several years. Many investors ask what they should do when they read that the companies in which they invested have collapsed. This article tries to offer some ideas for investors to consider when bad news about investment fraud arrives.

A defrauded investor should speak with an attorney who practices securities law. Securities law is highly specialized and few securities lawyers maintain offices in cities smaller than Indianapolis, Evansville, Ft. Wayne, or South Bend. You will not find a securities lawyer in a phone book and it is best to get a referral to such an attorney from a reputable attorney who maintains relationships with such experts.

Keep every scrap of paper that you can find about your investment. Sometimes investment documents give valuable information about investor rights. A “prospectus” is a document that usually includes opinions by accountants and attorneys about the financial strength and legal enforceability of the investment company's obligations. Sometimes, the people making those representations can be personally liable for investment loss if their opinions were incorrect or if they were not qualified to give the opinions in the first place.

Attorneys who give legal opinions about investments must be licensed in the states where the securities issuers are located. For example, if an attorney gave an opinion about an Illinois corporation that sells stocks or bonds without being licensed in Illinois, he or she may have committed the crime of unauthorized practice of law and be subject to fines and imprisonment in Illinois and further professional discipline in the state where the attorney is properly licensed.

Here are phone numbers for disciplinary agencies in some states from which some Hoosiers have been defrauded in recent years: 866-352-0707 (Florida Attorney Consumer Assistance Program); 217-522-6838 (Illinois Attorney Registration & Disciplinary Commission.); 313-963-5553 (Michigan Attorney Discipline Board); 502-564-3795 (Kentucky Office of Bar Counsel); 800-589-5256 (Ohio Office of Disciplinary Counsel); and 317-232-1807 (Indiana State Disciplinary Commission).

Loss prevention is always better than loss recovery. Generally speaking, if an investment sounds too good to be true, it probably is worse than you can imagine. If someone offers an investment opportunity and discourages an investor's efforts to double check the promoter’s claims, that investment promoter is probably setting you up for a scam.