In Mississippi, the Secretary of State’s Office regulates the sale of stock and registers public companies. The Division of Business Regulation and Enforcement is responsible for three state regulatory statues: the Mississippi securities act, the charitable solicitations act and the pre-need cemetery and funeral regulations act.
There are 16 employees in the division that is led by director Jim Nelson.
“We get involved when a company wants to expand and raises capital to finance that expansion through the sale of stock,” Nelson said. “Generally — that’s a big word — the stock a company issues and the people selling it must be registered with this office but there are certain statutory exceptions.”
The first thing Nelson and Nathan Thomas, senior attorney with the division, advise companies is to hire a good private attorney with experience in securities law. “A company wanting to sell stock can’t just hook up a printer and start turning out stock,” Nelson said.
Thomas says some examples of abuse include non-registration of the securities with the Secretary of State’s Office, the sale of stock in non-existent companies and unlicensed people coming into the state claiming to be stockbrokers who really aren’t.
“In many instances there are outright scams,” he said. “We typically find out through investor complaints. People start wondering when communication from the company ceases. Then the investor starts calling and gets promises but nothing else. After that, the investor gets nervous and calls us.”
This office also monitors state newspapers, looking for advertisements that appear suspicious. Nelson and Thomas say definite red flags that get their attention are the following claims in ads: no risk investments; high rates of returns; and guaranteed returns.
“These are false promises and misinformation,” Nelson said. “No one can guarantee you a rate of return. The stock market goes up and down. An investor should stop and think before investing. Be very cautious. Any time you’re tempted by investments, check it out first.”
Both state officials point out that with today’s computer technology, there are many ways to obtain information about investments. The National Association of Securities Dealers has a Web site with a page to check out brokers. Or, just typing in the name of a company into a search engine will many times produce all kinds of interesting things about it.
Also, there are blogs and message boards and news articles from other states alerting investors to beware of bogus stock investments.
An excellent source of information is the Web site of the North American Securities Administrators Association, www.nasaa.org. The securities regulators of all states, including Mississippi, are members. This Web site has a lot of information available for investors and each year selects the top ten scams and lists them there.
Both also encourage investors to call the Secretary of State’s toll free number, 1-800-804-6364, and to visit www.sos.state.ms.us with concerns about companies and investments.
“The principal of risk has always been a factor in investments. There has been an average of 10% return historically with the stock market,” Nelson said. “It’s like fire and not a place to play around. People need to be thorough in investigating and only invest what they can afford to lose. I tell average folks that all day long.”
Spreading the word
Indeed, the division conducts seminars to provide education courses and programs for investors and holds the Scam Jam every summer at the Jackson Medical Mall.
“We tell people to invest after everything else is paid. We’re out there trying to get the word out about investing,” Thomas said.
Ultimately, Thomas said, the shareholders and board of directors, not the government, are running these companies.
“In a free economy, the government is not running these companies,” Nelson said. “We do not oversee the operations of these companies, short of fraud or consumer abuse. We have some very good companies in Mississippi doing wonderful things for the state. The outlook is very positive. By weeding out the hucksters and scam artists, we intend to keep it that way.”
Contact MBJ contributing Lynn Lofton at email@example.com.