Is it illegal for a coin dealer to offer collectable coins as an "investment"?

[James_OldeTowne]

... and if so, why?

 

And does it matter whether the value of the coins is primarily derived from bullion?

 

I have been asked some version of this several times recently and gave what I thought was the correct answer, but if anyone can offer an appropriate answer couched in legal terms, I would appreciate it.

[newprepper]

I would think the only type of coin you could offer for investment would be bullion because there is a formula for determining value. There is no formula for nimismatic value.

[MarkFeld]

I believe that if coins are offered as an investment, they are supposed to be treated as a security, which would require a license.

[BillJones]

The Federal Trade Commission cracked down on some coin sellers years ago for advertising coins as an "investment" many years ago. The consent decrees that came out of it had stuff like, "You can't be in the coin business anymore." As would be expected these guys were from the group of bad actors who fleeced members of the public who had no expertise in numismatics.

 

One of firms that got nailed was New England Rare Coin Galleries which was the company James Halperin, now a major force at Heritage, started and later sold to group of investors. Halperin did not have an owership position in the company when it got into trouble. Despite these actions I've still seen a few dealers mentioning the word "investment" in their advertising. It's the type of thing that you can get away with if you are not overtly blatant about it.

 

[DaveG]

I think Mark is on the right track.

 

In most states, if you sell "investments", "securities" or "financial products" to the public, you have to have one or more State or Federal licenses to do so.

 

For example, I believe that all insurance salesmen have to have a basic license, and if they also want to sell annuities, they have to have another, specialized license.

[gmarguli]

I don't believe you do.

 

Bill mentioned the FTC, but they are a consumer protection agency. The SEC could have rules, but I've never heard of one.

[johnny9434]

i agree with mark. what licences are required i dont know

[MarkFeld]

I don't believe you do.

 

Bill mentioned the FTC, but they are a consumer protection agency. The SEC could have rules, but I've never heard of one.

 

I believe that selling rare coins as an investment, constitutes the sale of securities. And thus falls under the purview of the S.E.C.

[e1cnr]

Not sure if illegal, but FTC has some clout as to what they did with Heritage in 1989.

 

FTC ruling against NCI

[gmarguli]

I believe that selling rare coins as an investment, constitutes the sale of securities. And thus falls under the purview of the S.E.C.

 

The best I could find on the SEC site was that if you are paid for investment advice, they can have power over you. However, that doesn't necessarily mean that if I recommend (marketing / hype) something that I am selling as a great investment, that they would have power over me.

 

I also don't think that the term "investment" would be enough to have the item viewed as an actual investment. Colleges market themselves as a great investment in your future.

 

However, I'm sure a call to the SEC (or perhaps even to the ANA) could yield a more accurate answer.

[WoodenJefferson]

If at the time of sale, the coins are blatantly over graded or extremely over priced and sold for an increased investment purpose, it's considered an act of deception to fleece money from the unwary. Our civil legal system frowns on these actions, but only if brought forward and proven so in a lawsuit.

 

In the case of inter-state fraud, you will need the help of your states Attorney Generals office and perhaps the US Attorney Generals office, no one to mess with when they start handing down warrants and subpenas.

[Mr.Mcknowitall]

If at the time of sale, the coins are blatantly over graded or extremely over priced and sold for an increased investment purpose, it's considered an act of deception to fleece money from the unwary. Our civil legal system frowns on these actions, but only if brought forward and proven so in a lawsuit.

 

In the case of inter-state fraud, you will need the help of your states Attorney Generals office and perhaps the US Attorney Generals office, no one to mess with when they start handing down warrants and subpenas.

 

If the coins were blatantly undergraded, or extremely underpriced and bought for an increased investment purpose, is it considered an act of deception to fleece money from the unwary seller under investment banking laws?

 

Is it considered fraud?

[Conder101]

Back in the 60's and 70's the SEC used to go after coin dealers if they so much as mentioned investment in their ads with investigations and charges of selling unlicensed securities. This suddenly slowed down greatly once the government began touting the CC dollars they were selling through the GSA as an "investment". There was a lot of criticism back then about the government freely using ads and language that would have the SEC breathing down their necks if a private dealerships had used them.

 

Because of that I think the SEC is a little more lenient today, but start promoting coins as an investment too strongly and you may come under their scrutiny. (If you will notice the TV coin shows will talk about the coins they sell becoming "treasured heirlooms" or valuable items, or a legacy you can hand down to your children, but they will very seldom if ever call them an investment. And when/if they do it will be in very general terms, nothing specific. The -script they use has been gone over by their legal departments to make sure they are skating the edge of legality and not going over.)

[WoodenJefferson]

If at the time of sale, the coins are blatantly over graded or extremely over priced and sold for an increased investment purpose, it's considered an act of deception to fleece money from the unwary. Our civil legal system frowns on these actions, but only if brought forward and proven so in a lawsuit.

 

In the case of inter-state fraud, you will need the help of your states Attorney Generals office and perhaps the US Attorney Generals office, no one to mess with when they start handing down warrants and subpenas.

 

If the coins were blatantly undergraded, or extremely underpriced and bought for an increased investment purpose, is it considered an act of deception to fleece money from the unwary seller under investment banking laws?

 

Is it considered fraud?

 

In some circles, that would be considered a 'rip'

[Crohnos01]

If at the time of sale, the coins are blatantly over graded or extremely over priced and sold for an increased investment purpose, it's considered an act of deception to fleece money from the unwary. Our civil legal system frowns on these actions, but only if brought forward and proven so in a lawsuit.

 

In the case of inter-state fraud, you will need the help of your states Attorney Generals office and perhaps the US Attorney Generals office, no one to mess with when they start handing down warrants and subpenas.

 

If the coins were blatantly undergraded, or extremely underpriced and bought for an increased investment purpose, is it considered an act of deception to fleece money from the unwary seller under investment banking laws?

 

Is it considered fraud?

 

I think PT Barnum would speak about a fool and his money...