This is your February 16, 2012 edition of the Texas State Securities Board Bulletin, a biweekly roundup of state securities regulation news and investor education tips. To read past issues, please visit http://www.ssb.state.tx.us/News/index.php.

The State Securities Board regulates the securities industry in Texas. The Agency registers securities offered or sold in Texas; oversees the firms and individuals selling securities or providing investment advice; enforces the Securities Act through criminal, civil and administrative actions; and provides investor education presentations and material. For more information on the items in this issue, please contact Robert Elder, Communications, at 512-305-8386 or relder@ssb.state.tx.us.

David Boyer Prince attracted investors for his investment funds with promises of outsized returns and assurances that his expertise could be trusted – he was, after all, a licensed California attorney. Prince’s two funds -- one called the Leopard Fund, the other MJE Invest! – turned out to be nothing more than a Ponzi scheme. After being convicted on five counts of wire fraud in U.S. District Court in San Francisco, Prince on Feb. 8 was sentenced to seven years in federal prison. Prince already had a history in Texas, having been hit with a 2006 Cease and Desist Order that barred him from selling unregistered securities and misleading investors. Prince’s violation of that order was part of the federal case against him. Travis Iles, assistant director of the Enforcement Division, testified against Prince at trial.

Prince promised “guaranteed” returns of 5% a month (and greater), with investors’ money supposedly benefitting from a secret trading algorithm. Prince, however, used new investors’ money to pay off earlier investors. All told, he cost investors about $1.1 million. The government’s sentencing memorandum highlights the human toll of Prince’s fraud: A San Antonio pastor lost $50,000 in money earmarked for his children’s education; a Romanian immigrant hairdresser who lost $40,000, then lost her house to foreclosure; another victim’s losses forced him to declare bankruptcy and return to work – at age 69. Throughout his scam, Prince expressed disdain for his investors – calling one a “twit” – and in private correspondence admitted he would “look kind of silly” if his funds’ guarantees were investigated.

February 19-26 marks coordinated national, state and military campaigns to spur people to save more money. There are abundant free resources offered by the America Saves campaign. The Texas Saves website includes a list of Texas Saves Week events by city. On Military Saves, members of the military and their families can find resources geared to their specific personal financial challenges and listen to audio clips of military personnel talking about saving and managing money. The State Securities Board’s Investor Education site also features resources for the military, including the newly updated Salute to Smart Investing booklet.

A new study on spending by older Americans says retired households are spending only slightly more than their income each year – a function of overall household expenses steadily declining with age. According to the nonpartisan Employee Benefit Research Institute, retired households on average spend about 80% of what working households spend, and their earnings are about 57% of that of working households. As an overall average, that’s pretty good news. But a lot of sub-groups, not surprisingly, aren’t doing as well. Single households, some minority groups, and high school dropouts have very little financial wealth and their retirement spending far exceeds their income. The wild card in retirement spending is health care. Overall expenditures do decline – for a 65-year-old, household expenditure falls by 19% by age 75 and by 34% by age 85. But health-related expenses, the second-largest part of household budgets, steadily increase with age. Medicare covers everyone 65 and older, but as any recipient knows, it’s not comprehensive coverage.

Read the current Bi-Weekly Bulletin: February 16, 2012                                                 Disclaimer