It's hard to see how taking money from an individual for the promise of future profit could lie outside these realms, but that doesn't mean people have not tried. Flimflam artists jumped at the opportunity when an Austin, Texas, state district judge ruled that selling part of a partnership was not a security. Even more jumped into the business when Republican Senate Majority Leader Trent Lott publicly opposed SEC regulations as hindering business's ability to raise capital. There are now literally hundreds of thousands of salesmen under the oversight of relatively few thousands of regulators. And the crooks number tens, if not hundreds, of thousands.
Few states have more than a few dozen people regulating securities on their payroll.
The Securities and Exchange Commission has fewer than 2,500. Few investors have enough experience to ask for a prospectus, which would likely show that the company has no assets, no track record in business and no way to repay the loans. The notes are usually to be repaid in nine months to a year at interest rates of 12 percent to 15 percent. The pitch is that the company not only guarantees repayment plus interest but also buys an insurance policy to cover the guarantee. Some investors are actually offered repayment, but if so are generally induced to reinvest the principal and interest, and maybe some more of their savings, in another note.