Here are some answers to questions we receive frequently from investors about securities. We provide this for informational purposes only. It does not constitute legal advice.

1 How do I file a complaint?
2 If I have been defrauded in a securities investment, can the Securities Division get my money back?
3 Can the Securities Division represent me in a lawsuit?
4 Are there time limits for starting a lawsuit to get my investment back?
5 How long will the Division's investigation of my complaint take to complete?
6 How do I contact the Securities Division?
7 What are “securities”?
8 What are some examples of securities?
9 How do I find out if an old stock certificate has value?
10 Why is it important for me to know what securities are?
11 What are the warning signs of potential fraud?
12 What is a Ponzi scheme?
13 What laws govern the offer, sale and purchase of securities?
14 How do the North Carolina Securities and Investment Advisers Acts help me?
15 What rights do the North Carolina Securities and Investment Advisers Acts give me?
16 Who does the NC Securities Division regulate?
17 What do broker-dealers, stockbrokers and broker-dealer representatives do?
18 What responsibility does a broker have to me?
19 How can the Securities Division help me with broker-dealers, stockbrokers or broker-dealer representatives?
20 What do investment advisers and investment adviser representatives do?
21 What responsibility does an investment adviser have to me?
22 How can the Securities Division help me with investment advisers?
23 Does the NC Securities Division regulate insurance agents, insurance products or annuities?
24 Does the NC Securities Division regulate other financial professionals like estate planners, tax preparers, CPA’s, etc?
25 May a securities salesman register with and represent more than one broker-dealer firm at a time?
26 May an investment adviser representative register with more than one investment adviser firm at a time?
27 Where can I find the state laws governing stockbrokers and investment advisers?
28 What is the Qualified Business Tax Credit Program, and how does it work?
29 Is there anything else I need to know?

 


1. How do I file a complaint?

We have a form that requests the information we find the most helpful in conducting a securities investigation. We recommend you use this form. It is available on our website. You may file your complaint by mail, fax, email or in person at our Raleigh office located in the Millbrook Collection Shopping Center at the intersection of E. Millbrook Road and Atlantic Avenue. The physical address is 4701 Atlantic Avenue, Suite 116, Raleigh.

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2. If I have been defrauded in a securities investment, can the Securities Division get my money back?

It depends. The Securities Division does not have the authority to order the return of lost money to you. Only a court can do that. Sometimes a court names a receiver to find and liquidate a defendant’s assets and return the money to victims on a proportional basis. Sometimes we find that all of the stolen money has been spent, so there is no money to be returned. Sometimes the Division enters into settlement agreements whereby the party agrees to return money to investors. It is important to note, however, that the securities laws give you the right to sue for the damages you suffer from any violation of those laws.

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3. Can the Securities Division represent me in a lawsuit?

No. The Division does not have the authority to represent you individually in a civil suit. Any action the Division takes is on behalf of all North Carolinians. As an investor, you may sue anyone who defrauds you but you must retain your own attorney. The Division does not recommend any particular lawyer; however, you should find a licensed attorney who knows securities law. The North Carolina Bar Association's Lawyer Referral Service may help you find a qualified attorney.

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4. Are there time limits for starting a lawsuit to get my investment back?


In general, you have two years to file suit based on either the security or the salesperson being unregistered as of the date of sale or contract of sale. For fraud violations, you have three years from the date of discovery of the fraud, but no more than five years after the sale or contract of sale, unless the salesperson commits fraud or deception in order to conceal the fraud or in order to persuade you not to file a lawsuit. In this latter case you have three years from the date you discover the fraud or deception.

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5. How long will the Division's investigation of my complaint take to complete?


Each case is different but our process is the same. Within ten business days of receipt, each new complaint goes to our Case Review Committee. Our senior management, enforcement attorneys and investigators sit on this committee. They decide if they need more information, whether the Division has jurisdiction, or whether another agency might better respond to the complaint. If the Committee takes the case, it assigns an investigator and attorney to work the case. This stage takes time. Securities law is complex. We often must subpoena bank records and other financial records and pore over them to see what the subject did with investor money. Some cases take weeks, some months and others a year or more to get to the point of charging a suspect with a crime. The case then enters the judicial system and is subject to the court’s calendar. It is also important to remember that an investigation by the Division can result in the conclusion that no violation of the securities laws has occurred.

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6. How do I contact the Securities Division?


You may contact us at the following:

Mailing Address Street Address
NC Department of the Secretary of State
Securities Division
PO Box 29622
Raleigh, NC 27626-0622
NC Department of the Secretary of State
Securities Division
4701 Atlantic Avenue, Suite 116
Raleigh, NC 27604

Telephone: (919) 733-3924 or toll-free (800) 688-4507
Fax: (919) 807-2183.
Email: secdiv@sosnc.com

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7. What are “securities”?


There is no single definition of the term “security." Generally, a “security” is either a debt or ownership interest in some kind of business or venture. The investor makes an investment of funds or of something of value in order to get a profit generated by the managerial efforts of the promoter. Other than giving money to help fund the venture, the buyer plays no active role in the management of the business or venture.


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8. What are some examples of securities?


The most common types of securities are stocks and bonds. However, securities can include:
  • Certain certificates of deposit (CDs)
  • Promissory notes
  • Life settlement contracts (viaticals)
  • Interests in a business involved in the renovation and sale of distressed real estate property
  • Interests in a business involved with energy or technology development
  • Interests in a business involved with precious metals or foreign currencies

The list of products that are securities continues to grow as issuers become more creative. Although there are exceptions, you are likely buying a security if your only role in the enterprise is to invest money.

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9. How do I find out if an old stock certificate has value?


In general, a security is only worth what you can sell it for. However, for your certificate to have significant value, the company issuing it should still be in existence. The easiest way to determine if it has value is to ask a broker, a stock certificate company or a securities attorney to research the matter for you. These individuals may charge a fee to conduct this research. If you wish to do the research yourself, you should contact the agency responsible for corporate records filings in the state where you think the company is or was organized. For companies organized in North Carolina, contact the Corporations Division at (888) 246-7636 or (919) 807-2225. Additional information is available here on the SEC’s website.


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10. Why is it important for me to know what securities are?


It is important to know what securities are because federal and state laws give investors in securities certain legal rights. These rights include disclosure of important information by persons trying to sell securities and the right to bring a lawsuit based on the violation of a securities law.


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11. What are the warning signs of potential fraud?


Financial criminals are some of the smartest and most persuasive people you will ever meet. The “successful” con artist is a marketing expert who exploits your financial fears or desires. To avoid becoming a victim, look for these pressure tactics:
  • Promises of Wealth – The salesperson “guarantees” high returns in a short period of time with “little or no risk.”
  • Trappings of Success – The salesperson projects the image of success or offers “testimonials” proving his or her track record.
  • The “Lemming” Effect – The salesperson tells you that others are investing and you should too or risk missing a good deal.
  • Favors – The salesperson gives you something (like a free meal or a discount) hoping you will feel you need to give your money in return.
  • Act Now – The salesperson wants you to “act fast” because the deal is only for a limited time.
It is OK to say “NO” to an unsolicited sales pitch. Remember, if an investment sounds too good to be true, it probably is.

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12. What is a Ponzi scheme?


In a Ponzi scheme, the promoter uses money from later investors to pay fake returns to earlier investors. See our brochure entitled “Ponzi Schemes.”


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13. What laws govern the offer, sale and purchase of securities?


Although there are others, the main federal laws affecting the offer, sale and purchase of securities are:
  • The Securities Act of 1933
  • The Securities Exchange Act of 1934
  • The Investment Advisers Act of 1940, and
  • The Investment Company Act of 1940
The U.S. Securities and Exchange Commission (SEC) enforces these laws. More information is available at the SEC’s website.

The main state laws affecting the offer, sale and purchase of securities are:
  • The North Carolina Securities Act, and
  • The North Carolina Investment Advisers Act
The Securities Division of the North Carolina Department of the Secretary of State enforces these laws. More information is available on the Division’s website.

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14. How do the North Carolina Securities and Investment Advisers Acts help me?


The Acts help you because they:
  • Give you legal rights as an investor
  • Regulate who gets to be a broker-dealer or investment adviser
  • Regulate the conduct of broker-dealers and investment advisers
  • Permit the Securities Division to investigate allegations of misconduct by broker-dealers and investment advisers and by unregistered persons who may be selling unregistered securities

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15. What rights do the North Carolina Securities and Investment Advisers Acts give me?


The Acts give you the right to:
  • Ask for and receive information from a firm about the work history and background of the person handling your account, as well as information about the firm itself
  • Receive complete information about the risks, obligations, and costs of any investment before investing
  • Receive recommendations consistent with your financial needs and investment objectives
  • Receive a copy of all completed account forms and agreements
  • Receive account statements that are accurate and understandable
  • Understand the terms and conditions of transactions you undertake
  • Access your funds in a timely manner and receive information about any restrictions or limitations on access
  • Discuss account problems with the branch manager or compliance department of the firm and receive prompt attention to and fair consideration of concerns
  • Receive complete information about commissions, sales charges, maintenance or service charges, transaction or redemption fees, and penalties

You may also have a right to ask for repayment if you suffer damage from a violation of the Securities Act. Called a “right of rescission,” it only applies in certain circumstances. Those circumstances are set out in the Act. If you are eligible for the “right of rescission” you need to act promptly or you may lose this right. Click here to read the law.

Violators may face criminal penalties as well. Click here to read the criminal penalties for violating the NC Securities Act, and here to read the criminal penalties for violating the NC Investment Advisers Act.


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16. Who does the NC Securities Division regulate?


The Division regulates these types of persons engaged in the investment business:
  • Broker-dealers (BDs), stockbrokers and broker-dealer representatives,
  • Investment advisers and investment adviser representatives, and
  • Any unlicensed person selling securities

The Division may regulate any of these people or businesses if they:
  • Are present in North Carolina and offer or sell securities to persons inside North Carolina
  • Are present in North Carolina and offer or sell securities to persons outside North Carolina, or
  • Are present in another state but offer or sell securities to persons inside North Carolina

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17. What do broker-dealers, stockbrokers and broker-dealer representatives do?


These professionals buy and sell securities to or for their clients. They charge fees, commissions or markups for each trade they make to or for a client. They are in the business of buying or selling securities either for their own investment accounts or for their clients. Brokers are salespeople.


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18. What responsibility does a broker have to me?


With regard to the offer, sale or purchase of a security, your broker can only recommend investments that are suitable for you personally. Suitability relates to your individual needs, goals, and degree of risk you are willing to take. These suitability rules do not apply if you direct your broker to make a trade that he or she did not recommend.


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19. How can the Securities Division help me with broker-dealers, stockbrokers or broker-dealer representatives?


These professionals must register with the SEC or each state in which they wish to do business. They are also regulated by the Financial Industry Regulatory Authority (FINRA). FINRA keeps records on all its members and registered representatives nationwide. The Division can access these records. We can confirm a person’s or business’s registration status in our state. We can tell you if a person or business has a disciplinary record. Call us to check out the broker before buying any security.


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20. What do investment advisers and investment adviser representatives do?


These professionals provide advisory services, generally consisting of advice about buying, selling or holding securities. They can help you plan your financial future and make adjustments as your needs change or as the market changes. They also provide investment account management services. These professionals may charge a flat fee for their services, a fee on a percentage of your assets they manage, or a combination. They provide expertise. Unless authorized to do so, they cannot buy or sell securities for their clients.


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21. What responsibility does an investment adviser have to me?


The law requires an investment adviser to deal honestly with you and put your interests ahead of the adviser’s own interests. Your adviser must disclose real and potential conflicts of interest to you up front. Your adviser cannot lie to you, deceive you or fail to tell you important facts that might affect your decision to invest.


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22. How can the Securities Division help me with investment advisers?


Depending on the value of the assets they manage, investment advisers must register with the SEC or with each state in which they do business. The Division can confirm the adviser’s registration status in our state. We can tell you if an adviser has a disciplinary record. Call us to check out the adviser before you place any assets with the adviser.


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23. Does the NC Securities Division regulate insurance agents, insurance products or annuities?


No. This is the job of the NC Department of Insurance. However, because variable annuities are securities under federal law, only persons registered to sell securities may sell them. For more information, go to our website.


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24. Does the NC Securities Division regulate other financial professionals like estate planners, tax preparers, CPA’s, etc?


No. But, even if a person is a professional in another field, the Division may regulate:
  • Any person or business engaged in the offer, sale or purchase of securities
  • Any person or business providing investment advice for which they receive compensation
  • Any financial product satisfying the definition of a security

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25. May a securities salesman register with and represent more than one broker-dealer firm at a time?


No. A securities salesman may register with and represent only one broker-dealer firm at a time.


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26. May an investment adviser representative register with more than one investment adviser firm at a time?


It depends. An investment adviser representative may register with more than one firm if the firms are under common ownership or control, or the representative is acting as a "solicitor" for more than one investment adviser firm. A "solicitor" refers clients to the firm for a fee.


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27. Where can I find the state laws governing stockbrokers and investment advisers?


Click the link for the NC Securities Act.

Click the link for the NC Investment Advisers Act.

Click the link for the rules supplementing both acts.

The U.S. Securities and Exchange Commission (SEC) enforces federal securities laws and regulations.


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28. What is the Qualified Business Tax Credit Program, and how does it work?


The Qualified Business Tax Credit Program seeks to motivate investment in North Carolina businesses by offering a tax credit based on the amount invested. The Division reviews applications from businesses wishing to register under the Qualified Business Tax Credit Program. If a business qualifies, investors claim a credit on their North Carolina state income tax forms. The credit is generally 25% of the amount invested, with an annual cap of $50,000 per investor.

Only the investor, not the business, gets the tax credit. The investor claims the credit the year after the year of the investment. You may carry over unused credits for five years before they expire.

The North Carolina General Assembly has repealed the Qualified Business Tax Credit Program (“QB Program”) for investments made on or after January 1, 2014. Therefore, the Securities Division will not be accepting applications for renewal of registration.

Deadline for Initial Registration of Qualified Grantee or Qualified Licensee Businesses:
For businesses seeking to register as Qualified Grantee Businesses or as Qualified Licensee Businesses, the last date on which the Division will accept initial applications for registration is December 31, 2013. The effective date for Qualified Grantee Business and Qualified Licensee Business registrations will be the date that the Division receives the initial application, provided that the application satisfies the requirements for registration.

Deadline for Initial Registration of Qualified Business Ventures:
The last date on which the Division will accept initial applications for Qualified Business Venture applicants is March 3, 2014. Qualified Business Venture registrations enjoy the statutory benefit of a retroactive effective date, which is 60 days prior to the date the Division receives the initial application. However, remember that the General Assembly has repealed the QB Program for investments made on or after January 1, 2014. Therefore, even if a business can be initially registered as a Qualified Business Venture after January 1, 2014, the investment that seeks to qualify for the tax credit has to be made not later than December 31, 2013, and it must be made during the time that the registration is effective.

Visit our website and the NC Department of Revenue’s website for more information about this program.


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29. Is there anything else I need to know?


It is important to know that all investments carry risk. While you may reap great financial reward, you may also lose your entire investment. Even worse, you may find yourself owing more money than you originally invested. There is no insurance protection against investment loss. Any guarantee that you will make a profit should be viewed with extreme skepticism. The ups and downs of the market make it impossible to carry out such guarantees. Remember: The greater the potential gain, the greater the potential risk. Also, if asked only for an investment of money, remember that both the investment and the person selling the investment are subject to regulation under the securities laws of the state, and these laws give you legal rights. Finally, remember: If an investment sounds too good to be true, it probably is.


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