(The Center Square) – Nevada Secretary of State Francisco Aguilar’s proposed bill for a $500,000 securities fraud victim fund was recently well-received by state Senate Committee on Judiciary.
The Fund for the Compensation of Victims of Securities Fraud would entitle people up to $25,000 in restitution from the state if the bill, Senate Bill 76, were voted into law. It’s a crime that is often under-prosecuted.
“So often we know the victim, but we don’t know who did the crime,” said Sen. Edgar Flores, the Judiciary Committee’s vice chair.
“They utilized a Whatsapp, or some social media connection or an email. The money’s gone, and we never get to prosecute, unfortunately,” the Clark County Democrat said at the Feb. 20 hearing.
Securities fraud happens when consumers invest and lose their money based on a misrepresentation, or left-out but relevant information. It’s an especially predatory form of fraud that often targets seniors.
“An individual with a very low net worth or low salary is enticed to invest in a new local startup with a promise of a high rate of return,” Deputy Secretary for Securities Erin Houston told the committee. “Unfortunately, the offer itself was premised on fake statements, misleading information or missing information. When the investment fails, the individual is completely out of luck.”
When securities fraud perpetrators are caught and ordered to pay restitution, they often do not have the money or have hidden it. That means the victims are unable to recover the funds, even with a guilty verdict.
In 2023, people filed over $16 million in securities fraud complaints, Houston said. Only $205,000 was paid back to the victims.
The Secretary of State’s Office reported that each year it receives 150 to 200 cases of securities fraud. The proposed fund would start at $500,000, sourced from existing revenue from enforcement actions.
Even at a low estimate, this fund is unlikely to meet demand. If 100 victims received the maximum $25,000 in restitution, the fund would need to grow to $2.5 million.
“We want to get to a bigger number, but understanding the financial needs of the state… we wanted to be respectful,” said Aguilar, who made it clear that the fund accepts outside donations.
“If there’s an individual who is generous, like JP Morgan Chase, that understands what we’re trying to accomplish, they could make a contribution to the fund,” Aguilar told the senators.
Those attending the hearing overwhelmingly supported the bill, including the bipartisan eight-member Senate Judiciary committee, the bill’s sponsor. But no vote was taken.
“As a senior, I have seen firsthand the devastating impact of securities fraud on retirees,” Donna Clontz, a former prosecutor and member of AARP Nevada’s Executive Council, said.
“Many of us have worked hard to save for our retirement only to have our financial security threatened or eliminated by fraudsters,” Clontz told the committee. “Older adults in the U.S. lose more than $30 billion to financial fraud.”
Supporters of the bill argue the legislation would be a chance for Nevada to be a leader in securities fraud victim protection. The Secretary of State’s office reported that only six states currently have similar restitution assistance programs, including Montana and Indiana.
“It provides a way for Nevada residents to obtain desperately needed relief after losing what is often a significant chunk of their savings,” Aguilar said.
