WASHINGTON, D.C. – June 20, 2006 – The Securities Investor Protection Corporation (SIPC) and the Idaho Department of Finance announced today that they have worked together to halt an advertising campaign that could have misled unwary investors into believing that an investment was "insured through SIPC." SIPC was created by Congress to maintain a special reserve fund to help investors at bankrupt brokerage firms.
The case was triggered when an investor contacted the SIPC office in Washington, D.C. after reading a newspaper ad in the Idaho Statesman that was placed by "Network Investments," of Boise, Idaho. The ad and a related Web site urged investors to purchase Real Estate Construction Investments that supposedly were "insured through SIPC."
SIPC President Stephen Harbeck said: "The ads were misleading for three reasons. First, the investments were unregistered investment contracts, which are not protected under the Securities Investor Protection Act. Second, there was no indication that the investments were to be held in custody for the investors by a SIPC member brokerage firm. Third, SIPC's statutory role is to return securities to investors when their brokerage firm fails. SIPC does not 'insure' the underlying value of any security. The risk of market loss remains with the investor, just as the potential for market reward always remains with the investor."
Idaho Department of Finance Director Gavin Gee said: "Even one red flag, such as this phony SIPC insurance claim, is a sure sign that investors need to beware. This case is one more example of the adage 'if it sounds too good to be true, it probably isn't true.'"
SIPC notified the Idaho Department of Finance about the advertisements. On the next business day, the Idaho state agency issued a cease and desist (C&D) order against Network Financial Services, LLC, operating as Network Investments, and Shane Michael Turner, the individual controlling Network Financial.
"I was extremely impressed with the speed of the Idaho Department of Finance response," Harbeck said. "State securities regulators refer to themselves as the local 'cop on the beat' for small investors. This was a perfect example of a nimble, immediate response to what could have become a serious problem."