Investment fraud victims in Vermont will soon have a place to turn to seek compensation for their losses.
The state has passed legislation that will lead to the creation of a restitution fund for state residents who fall victim to investment scams, according to Vermont’s Department of Financial Regulation.
Those who fall victim to investment scams on July 1 or after, in cases initiated by state authorities, will be able to apply for at least partial restitution of their losses if full amounts are not available through the efforts of the courts and prosecutors, said Michael Pieciak, the state's commissioner of financial regulation.
One of the primary reasons the department pushed for the fund, Pieciak said, was that, in most cases, the money defrauded from investors is already gone by the time scam artists are prosecuted.
"You see it across all states, but we have a number of cases we see every year where an individual has been defrauded and the person who has defrauded them has depleted all the money,” he said to Financial Advisor on Thursday. “There is nothing to bring that back to the [victim]."
In many cases, he added, the victims of these investment scams are senior citizens who don't have as much time and resources to recover from losses as do younger victims. That's one of the reasons senior citizens and others deemed by the law as "vulnerable persons" are eligible to receive up to $50,000 through the fund, while other victims would receive only up to $25,000.
Senior citizens “are oftentimes isolated, making them more vulnerable," said Pieciak, who is also president of the North American Securities Administrators Association (NASAA). "I do think there will be more vulnerable individuals, senior Vermonters, that apply compared to the rest of the population.”
Vermont is the third state to set up such a fund, following Indiana, which created one in 2011, and Montana, which set one up in 2013, he said.
In the case of Vermont, money for the fund will come from what is collected through settlements, fines and court actions stemming from state securities law enforcement, Pieciak said. An application process is expected to be announced by the end of the year, but since the law takes effect July 1, state residents involved in any rulings on or after that date are eligible to apply, he said.
The state takes in about $2 million to $3 million per year through securities law enforcement, meaning the department expects to quickly get the compensation fund to a self-sustaining level of $500,000 to $1 million, he said. A portion of the money will go toward investor education.