Millions of dollars earmarked for investor education across the country

Back in 2003, major Wall Street firms agreed to pay more than $1 billion to settle claims that their research analysts hyped stocks to curry favor with — and get business from — the companies they covered.

As part of that landmark settlement, $30 million was deposited with the nonprofit Investor Protection Trust to split among the states. The money is available to nonprofit groups, colleges, state agencies and local governments for investor education.


Maryland's share: $489,720.

But Maryland groups have barely tapped it in all this time. Only three proposals here have been submitted and funded. Our balance at the end of April was $449,406.


(The IPT holds $46,260 in another account for Maryland organizations, and the state used $862 of that money to buy display materials for investor conferences.)

That's a lot of money — especially in these days of tight budgets to not put to good use.

Some other states have nearly used up their funds. Agencies and nonprofits elsewhere have used the cash to produce television programs and public service announcements, create online classes, educate high school students about the stock market and train doctors to spot elder financial abuse. Teachers, tribal members and credit union employees also have received investor education so they can share that knowledge with others.

Marylanders could benefit from similar training. Surely there are agencies and organizations here that can come up with worthy projects.

Getting a grant is a two-step process. Applicants first must submit a letter of inquiry to the IPT that includes information about the project and a show of support from the state's securities regulator. Projects are not supposed to duplicate other efforts in the state.

If an idea is deemed deserving, the IPT trustees will invite the applicant to submit a full proposal.

IPT President Don Blandin says trustees look for projects that are sustainable, increase investors' knowledge and affect their behavior.

"We're not a flavor-of-the-month funder — a program here today and then next month do something totally different. These one-shot programs are just that. They are one shot, and people forget about them," Blandin says. "We're trying to get people to be wise and safe investors, to understand the process of investing before they buy a product."

When proposals are rejected, he says, it's usually because they don't deal with investor education and lack support from state regulators.

Two of the three Maryland grants were awarded to the Maryland Council on Economic Education to send hundreds of teachers to financial education summits.

Executive Director Mary Ann Hewitt says it was difficult at first to find a project that fit the IPT criteria. But once the council did, she says, grants were easy to come by.

The third grant went to the state to reprint an investment guide for military service members.


Melanie Senter Lubin, the state securities commissioner, says her office does some investor education on its own, but it hasn't made greater use of the IPT funds because it doesn't have the staff to run new programs.

"Right now, our resources are going into the regulatory and enforcement work," she says. "You can't use the grant money to fund personnel to run the projects."

Lubin says she wishes the grant program were more flexible, too. IPT focuses strictly on investor education, she says, while many people could benefit from programs aimed at financial literacy.

Still, Lubin says, she has been talking with groups about partnering on programs that can be funded with IPT money. (According to Blandin, the IPT has paid the salary of workers at nonprofits that partner with states.)

The IPT was created in 1993 to focus on investor education as part of an earlier settlement involving charges of Wall Street misconduct. (Given Wall Street's record, it's unlikely the IPT will run out of money.)

The nonprofit had about $19.7 million in funds at the end of April, according to its latest report. Much of that is from the 2003 research analyst settlement that provided at least $300,000 for each state. Those with larger populations are eligible for more.

Craig Goettsch, one of the five trustees, says they had considered broadening the IPT's mission years ago but decided against it.

"A lot of organizations and a lot of foundations sponsor and fund financial literacy," he says. "There is virtually no one doing investor education."

Others agree with the IPT's focus.

"The settlement funds were put into place because of investment-related issues," says Amanda Blanks, investor education coordinator for Virginia. "It makes sense that it would go toward investor education."

Despite restrictions, some states have made good use of their IPT money — which can serve as examples to Maryland's agencies and nonprofits.

Oregon ran a series of public service announcements last summer on investment topics, such as how to check out a broker, and launched a website for investors. Hampton University in Virginia held a town hall meeting featuring securities regulators talking about investing before an audience made up mostly of students, Blanks says.

Indiana surely would win the award for most clever with its program to combat Internet investment fraud. The state created online ads for investments in fake companies. If you click on the ad to invest, a warning message from the Indiana securities commissioner pops up.

In North Carolina, a group produced a documentary on an investment scandal that hit residents there. And a Wisconsin-based nonprofit held a 10-hour online investor education course for North Carolinian credit union employees — who are among the first to notice if customers are victims of fraud, according to George Jeter, spokesman for the North Carolina secretary of state.

The largest chunk of the settlement money, $3.1 million, was set aside for California, and less than a third of that is left.

Andrew Roth, director of education and outreach for California, says the most expensive project was financing — along with other states — three seasons of "MoneyTrack," a public television series that still airs in California and around the country.

Among its other programs, California launched Troops Against Predatory Scams, in which state officials visited military installations to provide investor education and discuss the warning signs of fraud. The state also published an educational booklet for service members and their families.

Roth says the IPT money has come in handy for states like his.

"It's a wonderful resource," he says, "especially in this time of stress on state budgets nationwide."

He's right. And Marylanders should take advantage of that resource, too. Details on how to apply for grants are available at investorprotection.org.


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