A. Heath Abshure: Don't Let Embarrassment Get In the Way of Reporting an Investment Scam

A. Heath Abshure was appointed to lead the Arkansas Securities Department by Gov. Mike Beebe in December 2007.

Before becoming commissioner, Abshure was a partner at the Williams & Anderson firm in Little Rock and a staff attorney for the Securities & Exchange Commission in Washington, D.C. He also is the president of the North American Securities Administrators Association. In addition, Abshure is an observer member of the U.S. Securities & Exchange Commission Advisory Committee on Small & Emerging Companies.  

Abshure earned his law degree from the University of Arkansas at Little Rock William H. Bowen School of Law and a Master of Law degree with distinction in securities and financial regulation from the Georgetown University Law Center.  

Q: What is your role at the Arkansas Securities Department?

A: The department has jurisdiction over the securities industry, including offers and sales of securities and investment professionals such as investment advisers and broker-dealers, mortgage loan companies and loan officers, money transmission and currency exchange businesses, state-chartered savings and loan institutions, state-chartered credit unions. And we staff the Arkansas Cemetery Board, which regulates Arkansas perpetual care cemeteries.

What trends are you seeing in the securities industry? Do any of the new ways to raise money for businesses such as Kickstarter or through crowd funding concern you?

The SEC recently approved final rules allowing general solicitation and advertising in private offerings. Crowd funding rules are waiting in the wings. These new methods of raising money scare me. Small-business investments are typically one of the most speculative and illiquid investments around. The Jobs Act has opened up these types of investments to the investors least able to tolerate the particular risks associated with them. Investors are soon to be bombarded with advertisements for investment opportunities offering the stereotypical “no risk, guaranteed return.” This is a giant red flag that should put any investor on alert. A lot of investors will lose money. Plus, there will be so much noise in the market that legitimate companies will not be heard over the claims of the fraudsters. Investors won’t trust the market, and they won’t invest. Companies won’t get funded and no new jobs will be created.

What are the most common types of complaints the ASD is getting? And are there any new types of complaints?

Through our compliance examination program, we are seeing a drastic increase in the number of nontraditional, alternative investments sold to customers that have traditionally invested in CDs, mutual funds, government bonds and similar instruments. The complaints relating to nontraditional investments are also on the rise. Investors remain scared of the traditional securities markets. Plus, some investors place an undue focus on investment returns rather than diversification and balance. Certain unscrupulous salesmen will prey upon these fears and greed to sell investment products that are unsuitable for the particular customer.

What are the challenges of regulating securities in Arkansas?

The biggest challenge is getting investors to call us with questions or complaints. People do not like to admit that they have questions about their finances, and they certainly do not like to admit that they have been scammed.

What should investors do to protect themselves and how can your office help?

Call the department before you invest in any security, before you invest with any securities professional and anytime that you think you have been defrauded. Let us tell you what we know about the particular investment or the salesperson. Don’t ever let embarrassment get in the way of talking to us. Let us help you if we can.