Presentation to the Palm Beach Chamber of Commerce on November 5th 2009 regarding spotting financial fraud and ponzi schemes in investment accounts by securities attorneys.

1. Ponzi Schemes and Investment Fraud:A Year Later Presented by: Craig D. Stein 205 Worth Avenue, Suite 203 Palm Beach, FL 33480 Tel.: (561) 659-8802

2. We Will Discuss Two Types of Frauds Affinity Fraud General Brokerage / Investment Fraud

3. Affinity Fraud / Ponzi Schemes A. What is Affinity Fraud / How does it work? Nature has ingrained:

4. Affinity Fraud / Ponzi Schemes A. What is Affinity Fraud / How does it work? Political / Economic Social / Achievement Interests Religion

5. Affinity Fraud / Ponzi Schemes A. What is Affinity Fraud / How does it work? Those you trust the most can do the most damage

6. Affinity Fraud / Ponzi Schemes B. Affinity Fraud in the Past: “Jack and the Beanstalk”

7. Affinity Fraud / Ponzi Schemes C. Affinity Fraud in the Present:On Guard, But What do You Look For?

8. Affinity Fraud / Ponzi Schemes C. Affinity Fraud in the Present:On Guard, But What do You Look For? Private Rather than Public Investment Unusual or Complicated-Sounding Investments Promise and History of High Returns Short Term for High Returns

9. Affinity Fraud / Ponzi Schemes C. Affinity Fraud in the Present:On Guard, But What do You Look For? Continuous Stream of Returns (Despite Market Volatility) Open Ended: Opportunity for Continued Reinvestment Open to New Investors Even if it does not Appear So.

10. Affinity Fraud / Ponzi Schemes C. Affinity Fraud in the Present:On Guard, But What do You Look For? Seeking out Referrals Little or No Oversight Where are Funds Directed? Paper Statement from independent 3rd Party You Should Not be Made to Feel Uncomfortable to Question the Investment

11. Affinity Fraud / Ponzi Schemes If It’s Too Good to Be True, It Probably Is:

12. Affinity Fraud / Ponzi Schemes If It’s Too Good to Be True, It Probably Is: It is Subjective Like Other Platitudes – People Do Not Follow: Don’t Judge a Book by Its Cover An Apple a Day Keeps the Doctor Away

13. Affinity Fraud / Ponzi Schemes If It’s Too Good to Be True, It Probably Is: People Seek What is Too Good to Be True

14. Affinity Fraud / Ponzi Schemes If It’s Too Good to Be True, It Probably Is: The More Financially “Successful” in Society have Already Achieved what’s “too good to be true,” usually by taking risks. Seek guidance from 3rd Party to determine if an investment is “too good to be true”

15. Economic & Financial Industry Fraud & Negligence A. In the Past: They are regulated, So Why Do I Have to Do Anything?

16. Economic & Financial Industry Fraud & Negligence B. In the Present: Tell Me What to Look For! ??

17. Economic & Financial Industry Fraud & Negligence B. In the Present: Tell Me What to Look For! Just Because Your Investments Lost Money Does Not Mean that Anyone Acted Inappropriately Also, the Inverse – Just Because There Are Profits in Your Account, Does Not Mean You Are Suitably Invested

18. Economic & Financial Industry Fraud & Negligence B. In the Present: Tell Me What to Look For! Insidious: Because they may Only Partially Dilute or Reduce Your Investments

19. Economic & Financial Industry Fraud & Negligence B. In the Present: Tell Me What to Look For! Often Hidden by Market Appreciation and Excused by Market Depreciation

20. Economic & Financial Industry Fraud & Negligence B. In the Present: Tell Me What to Look For! These often Occur in Brokerage Accounts, even with Investment Advisors and Even in Trust Accounts

21. These Occur in Brokerage Accounts, with Investment Advisors and Even in Trust Accounts Sale and Recommendation of Unsuitable Investments Client Objectives Risk Tolerances Types of Investments Sophistication Does Not = Wealth

22. Diversification and Over-Concentration Individual Stocks Individual Sectors Types of Investments (Equities, Debt) Hedging

23. Churning Excessive Trading Who Controls Account Looper Formula

24. Unauthorized Trades Discretion Authority Time and Price

26. Reliance Upon the Information Provided by the Brokerage Firm (ARS, LPS)

28. Government / Regulation A. In the Past: Act Upon What They Know - Reactive Government Issued Blinders

29. Government / Regulation A. In the Present: Despite Good Intentions,Still Act Upon What They Know - Reactive Still Using Government Issued Blinders

30. Government / Regulation B. In the Present: Still Act Upon What They Know - Reactive Increase Scrutiny Upon Those We Already Regulate Review Old Case Files They Still Cannot Know What They Do Not Know

31. If You Are Concerned About an Affinity Fraud… A. Seek Advice of Another Independent and Competent Investment Professional

32. If You Are Concerned About an Affinity Fraud… B. Refer to Industry Regulators – Tell Them What They Do Not Know (SEC, FINRA, State, etc.)

33. Closing Remarks A. Each of You are Individuals With Different Investment Objectives and Risk Tolerances

34. Closing Remarks B. Ask Your Financial Advisors; And Just As Important: LISTEN to Their Answers Why is This Investment Suitable for Me? How Much Can I Lose? Am I Adequately Diversified?

35. Closing Remarks B. Ask Your Financial Advisors; And Just As Important: LISTEN to Their Answers Are You Recommending This For Other / All of Your Clients? What is Your Understanding of My Objectives and Risk Tolerances?

36. Closing Remarks B. Ask Your Financial Advisors; And Just As Important: LISTEN to Their Answers Carefully Review your Opening Account Documentation. Do not just sign a stack of documents. Read and Understand Your Account Statements: Ask 1) Broker, 2) Branch Manager, 3) Different Advisor

37. Closing Remarks C. With Financial Fraud, It is ALWAYS a Year Later