Legal Articles

The Scope of the Problem

Most consumers invest in traditional offerings--stocks, bonds, and commodities--that are regulated by the Securities and Exchange Commission (SEC), the Commodities Futures Trading Commission (CFTC), and state securities regulators. However, many consumers also invest large sums in less traditional offerings that either are outside SEC and CFTC jurisdiction or subject to shared jurisdiction with the FTC. Among these are investments in tangibles (for example, rare coins, art, precious metals), oil and gas lottery application services, and telecommunications. In investment cases brought by the FTC in 1996, scam artists consistently took thousands of dollars from consumers. Among complaints in the FTC/NAAG Telemarketing Complaint System, investment fraud represents more than half of all consumer dollar injury reported, with an average loss of over $15,000 and losses as high as hundreds of thousands of dollars per consumer. In just two invention promotion cases challenged by the FTC in 1996, defendants took more than $100 million from thousands of consumers over the life of the frauds, following obviously effective advertising on several national cable stations by the fraud promoters.