California Financial Planning Newsroom

Be Aware Of California's Investment Schemes and Scandals

Variable Annuities:
Annuities are insurance contracts with tax-deferred earnings. Most states do not define annuities as securities, and in California, the Department of Insurance has jurisdiction over the sale of annuities. A common method of sales that Californians should be wary of is through free financial planning seminars aimed at seniors, where sales people often employ bait-and-switch and other aggressive sales tactics to sell variable annuities.

Mutual Fund Business Practices:
Ongoing scandals demonstrate that some in the industry are putting their own interests ahead of mutual fund shareholders. State and federal investigations have uncovered sales contests where investors have been steered to funds paying higher commissions to brokers, abusive trading practices such as "market timing," and illegal trading practices, including "late trading."

Affinity Fraud:
Many scammers use their victim's religious or ethnic identity to gain their trust, knowing that it's human nature to trust people with common backgrounds. The Department of Corporations has noticed a recent increase in the number of scams perpetuated by people who approach their fellow church members with fraudulent investment schemes.

Oil and Gas Investments:
The Department recently issued a Desist and Refrain order against Ram Energy Incorporated for selling approximately $10 million worth of unqualified, nonexempt securities. The securities were in the form of limited partnerships that were created with the objective to purchase working interests in oil and gas leases, among other things.

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