Information is an investor’s best tool when it comes to investing wisely and avoiding fraud. And the best way to gather information is to ask questions– about both the investment and the person or firm selling it. It doesn’t matter if you are a beginner or have been investing for many years, it’s never too early or too late to start asking questions.
Too many investors who’ve suffered losses at the hands of swindlers could have avoided trouble if they had only asked basic questions from the start. One simple phone call-to your state securities regulator or the U.S. Securities and Exchange Commission (SEC)-can often make the difference between investing in a legitimate business or squandering your money on a scam.
This unit will help you recognize and avoid different types of investment fraud. You’ll also learn what questions to ask before investing, where to get information about companies, who to call for help, and what to do if you run into trouble.
Navigating the Investing Frontier: Where the Frauds Are
Many fraudsters rely on the telephone to carry out their investment scams. Using a technique known as cold calling (so-called because a caller telephones a person with whom they have not had previous contact), these fraudsters will hound you to buy stocks in small, unknown companies that are highly risky or, sometimes, part of a scam. In recent years, the Internet has also become increasingly attractive to fraudsters because it allows an individual or company to communicate with a large audience without spending a lot of time, effort, or money.
You should be skeptical of any offers you learn about from a cold caller or through the Internet. Here’s what you need to know about cold calling and Internet fraud.
For many businesses, including securities firms, cold calling serves as a legitimate way to reach potential customers. Honest brokers use cold calling to find clients for the long term. They ask questions to understand your financial situation and investment goals before recommending that you buy anything.
Dishonest brokers use cold calling to find “quick hits.” Some set up “boiler rooms” where high-pressure salespeople use banks of telephones to call as many potential investors as possible. Aggressive cold callers speak from persuasive scripts that include retorts for your every objection. As long as you stay on the phone, they’ll keep trying to sell. And they won’t let you get a word in edgewise.
Whether the calls are annoying, abusive, or downright crooked, you can stop cold callers. The law protects you by requiring cold callers to follow several rules.
When people from the securities industry call to sell something, they must:
- Call Only Between 8:00 a.m. and 9:00 p.m. These time restrictions do not apply if you are already a customer of the firm or you’ve given them permission to call you at other times. Cold callers may call you at work at any time.
- Say Who’s Calling and Why Cold callers must promptly tell you their name, their firm’s name, address, and telephone number, and that the purpose of the call is to sell you an investment.
- Put You on Their “Do-Not-Call” List, If You Ask Every securities firm must keep a “do-not-call” list. If you want to stop sales calls from a firm, tell the caller to put your name and telephone number on the firm’s “do-not-call” list. If you continue to receive calls from that firm, get the caller’s name and telephone number, note the date and time of the call, and complain to the firm’s compliance officer, the SEC, and your state securities regulator. At the end of this unit, you’ll find information on how to make a complaint.
- Treat You With Respect Cold callers can’t threaten or intimidate you or use obscene or profane language. They also can’t call you repeatedly to annoy, abuse, or harass you.
- Get Your Written Approval Before Taking Money Directly from Your Bank Accounts Before investing, you should always get answers to the questions below and written information about an investment. If you do decide to buy from a cold caller, do not give your checking or savings account numbers to the broker over the phone. Brokers must get your written permission-such as your signature on a check or an authorization form-before they can take money from your checking or savings account.
- Tell You the Truth People selling securities must tell you the truth. Brokers who lie to you about any important aspect of an investment opportunity violate federal and state securities laws.
To learn more about how to deal with cold calls, how to stop them, and how to evaluate any investment opportunity that comes your way over the telephone, read the SEC’s Cold Calling: Know Your Rights. You’ll find this brochure on the SEC’s Web site at www.sec.gov/investor/pubs/coldcall.htm or you can order it by calling the SEC’s toll-free investor assistance line at 1-800-SEC-0330.
The Internet serves as an excellent tool for investors, allowing them to easily and inexpensively research investment opportunities. But the Internet is also an excellent tool for fraudsters. That’s why you should always think twice before you invest your money in any opportunity you learn about through the Internet.
Anyone can reach tens of thousands of people by building an Internet Web site, posting a message on an online message board, entering a discussion in a live “chat” room, or sending mass e-mails. It’s easy for fraudsters to make their messages look real and credible. But it’s nearly impossible for investors to tell the difference between fact and fiction.
The most common methods for Internet investment scams are:
- Online Investment Newsletters Hundreds of online investment newsletters have appeared on the Internet in recent years. Many offer investors seemingly unbiased information free of charge about featured companies or recommend “stock picks of the month.” While legitimate online newsletters can help investors gather valuable information, some online newsletters are tools for fraud. Some companies pay cash or securities to people who write online newsletters in exchange for recommending their stocks. While touting isn’t illegal by itself, the federal securities laws require the newsletters to disclose who paid them, the amount, and the type of payment. But many fraudsters fail to do so. Instead, they’ll lie about the payments they received, their independence, their so-called research, and their track records. These fraudsters usually stand to profit handsomely if they convince investors to buy or sell particular stocks.
- Online Message Boards Online message boards are an increasingly popular forum for investors to share information. Message boards typically feature “threads” of messages on various investment opportunities. While some messages may be true, many are bogus-or even scams. Fraudsters often pump up a company or pretend to reveal “inside” information about upcoming announcements, new products, or lucrative contracts. Also, you never know for certain who you’re dealing with-or whether they’re credible-because many messageboards allow users to hide their identity behind multiple aliases. People claiming to be unbiased observers who’ve carefully researched the company may actually be company insiders, large shareholders, or paid promoters. A single person can easily create the illusion of widespread interest in a small, thinly traded stock by posting a series of messages under various aliases.
- E-mail Spams “Spam” (junk e-mail) is so cheap and easy to create that fraudsters increasingly use it to find investors for bogus investment schemes or to spread false information about a company. Many more potential investors can be targeted with spam than with cold calling or mass mailing. Using a bulk e-mail program, spammers can send personalized messages to thousands and even millions of Internet users at a time.
For more information about how to protect yourself from Internet fraud, visit the Onguard Online Web site and review the materials on online investing, which are available at www.OnGuardOnline.gov/topics/online-investing.aspx.
The types of investment fraud seen online mirror the frauds perpetrated over the phone or through the mail. Here are the most common investment schemes and the “red flags” you should watch for:
The “Pump and Dump” Scam
It’s common to see messages posted on the Internet that urge readers to buy a stock quickly or to sell before the price goes down. Cold callers often call using the same sort of pitch. Often the promoters will claim to have “inside” information about an impending development or an “infallible” combination of economic and stock market data to pick stocks. In reality, they may be insiders or paid promoters who stand to gain by selling their shares after the stock price is pumped up by gullible investors. Once these fraudsters sell their shares and stop hyping the stock, the price typically falls and investors lose their money. Fraudsters frequently use this ploy with small, thinly traded companies because it’s easier to manipulate a stock when there’s little or no information available about the company.
“Ponzi” and Pyramid Schemes
These investment scams are essentially “robbing one person to pay another.” Initial investors are paid off with money taken from new investors. As long as a steady flow of new investors keeps coming in, there will be money to pay off the old investors. This early return on investment is misleading, however, because when the new investors stop coming in, the scheme collapses, investors lose their money, and the fraudsters walk away rich.
“Affinity fraud” describes investment schemes that prey upon members of identifiable groups, including religious communities, the elderly, ethnic groups, and professionals such as lawyers, doctors, or teachers. Fraudsters often exploit the sense of trust and friendship in groups of people who have something in common. Fraudsters assume that the tight-knit structure of many groups makes it less likely that a scam will be detected by regulators and law enforcement officials and that victims may be more likely to forgive “one of their own.” They’ll enlist respected leaders within a community to spread the word about an investment deal. The key to avoid being a victim in an affinity scheme is to ask questions and check out everything-no matter how trustworthy the person is who brings the investment opportunity to your attention.
Oil and Gas Scams
If you think you’ve found the right oil or gas investment to “strike it rich,” consider this: it may be a scam. While some oil and gas investment opportunities are legitimate, many oil and gas ventures are frauds. Many of these schemes start in so-called “boiler rooms,” where skilled telemarketers use high pressure sales tactics to convince you to hand over your hard-earned money. Oil and gas scams typically increase after highly publicized news item, like volatile gas prices, to lure potential investors and make their “opportunity” sound more legitimate.
A promissory note is a form of debt-similar to a loan or an IOU-that a company may issue to raise money. Typically, an investor agrees to loan money to the company for a set period of time. In exchange, the company promises to pay the investor a fixed return on the investment. While promissory notes can be legitimate investments, those that are marketed broadly to individual investors often turn out to be scams. Investors should be careful to determine their legitimacy and should seek the advice of an objective third party when in doubt.
Prime Bank Fraud
In a prime bank scheme, fraudsters often claim investors’ funds will be used to purchase and trade “prime bank” financial instruments or other “high yield investment programs” on clandestine overseas markets in order to generate huge returns in which the investor will share. However, neither these instruments, nor the markets on which they allegedly trade, exist. To give the scheme an air of legitimacy, the promoters distribute documents that appear complex, sophisticated and official. The sellers frequently tell potential investors that they have special access to programs that otherwise would be reserved for top financiers on Wall Street, or in London, Geneva or other world financial centers.
Estate Planning Fraud
Another common scam involves estate planning (planning for disposition of your assets after your death) and financial services. Scam artists involved in this type of fraud and deceit usually meet the consumer at a meeting site or during an in-home visit. They pose as business people offering a variety of services, including help with estate planning. There are a wide variety of tools available to help with planning, but a popular tool for scam artists to push is a “living trust.”
When developed properly, by professionals such as attorneys, a living trust can be an excellent tool for your estate planning needs. A living trust is created while you are alive, and allows you to control the distribution of your estate. You transfer ownership of your property and your assets into the trust. Then the trustee (the person or institution that controls the trust) will distribute the assets upon your death.
Assets placed in the living trust are not subject to probate, and this can save time and money when settling your estate. It is important to remember that a living trust might not be the best planning tool for every estate. Poorly executed living trusts can cost you money and may not carry out your intentions.
Some scams try to sell services to create a living trust and use this as a tool to access your personal information. Once they have your financial information, they may try to sell you additional products or services, including insurance annuities. These may look like lucrative investments, but you should evaluate your situation and decide what is best for your family. Often a different type of estate planning or investment will be better investment vehicle, depending on your circumstances. It is very important that you know who you are dealing with, that you get referrals, and that you thoroughly investigate the business reputation of those attempting to sell you financial investment and/or estate planning services.
Farm and Ranch Fraud
Fraudulent and deceitful practices aren’t limited to mail and Internet schemes or selling you faulty estate planning services. With the cost of inputs rising, it is harder to make ends meet on the farm or ranch. Some fraudulent schemes involve lying to investors about the number of cattle on feedlots and conspiring to set the prices of cattle at auctions. There are federal laws that prohibit these types of activities, including the Packers and Stockyards Act. It is important to know those that you do business with and make sure they have sound business practices.
Other offers to be wary of include lucrative leases for oil and gas, offers to purchase mineral or water rights, and offers to purchase carbon credits. Owning property involves more than just owning real estate. One comparison that is frequently used is the bundle of sticks theory. This is the theory that your property rights are like a bundle of sticks – that is, your property ownership is comprised of many separate rights: water rights, mineral rights, air rights, access rights and so on. You can give away or sell some of your rights while retaining the actual ownership of the property, or stated another way, you can give away or sell some of your sticks, but you still have a bundle.
When signing a lease or any other document regarding one of your property rights, it is important to know and understand exactly what rights you are leasing. Often in oil and gas leases, there is language that allows the drilling company to access your ground water and to drill wherever they like. These are important considerations when signing a lease. It is imperative that when dealing with important rights associated with your real property (land) that you have a qualified legal advisor thoroughly review documents before you sign them, regardless of the royalty or lease bonus payments you are being offered.
High Return or “Risk Free” Investments
Some unscrupulous investment advisers make unsuitable recommendations to purchase investment products that don’t meet the investment objectives or means of an investor. Unsuitable recommendations might occur when a broker sells speculative investments such as options, futures or penny stocks to a 95-year-old widow living on a fixed income with a low risk tolerance. Investors should be careful to review the risk profile of each investment recommendation and should seek the advice of an objective third party when in doubt.
In summary, the Internet provides tremendous opportunities for sharing information and connecting with people from around the world. It also provides the perfect opportunity for scammers to take advantage of unsuspecting individuals. Some of the most prevalent schemes and fraud operations, either general consumer fraud or investor fraud, are taking place online.
Online “scams” sometimes ask for funds to be wired directly to requester since there is little recourse for the victim once the money has been sent. Often these scams involve checks that appear to be valid, but are fake. It could take days for the depositing bank to discover the checks are fraudulent. By this time, any money that has been wired associated with the transaction may be spent and most likely not be recoverable.
Internet and mail fraud provide a way for scam artists to strike without you ever knowing who they are or seeing them face-to-face. You should also be very wary of business people that come to you making offers that seem too good to be true.
How to Avoid Investment Fraud
To invest wisely and avoid investment scams, research each investment opportunity thoroughly and ask questions. Get the facts before you invest, and only invest money you can afford to lose. You can avoid investment scams by asking-and getting answers to-these three simple questions:
1. Is the investment registered? Many investment scams involve unregistered securities. So you should always find out whether the company has registered its securities with the SEC or your state securities regulators. You can do this by checking the SEC’s EDGAR database.
Some smaller companies don’t have to register their securities offerings with the SEC, so always check with your state securities regulator. You’ll find the number for your state securities regulator in the government section of your phone book. You can also call the North American Securities Administrators Association (NASAA) at or visit NASAA’s Web site at www.nasaa.org. One simple phone call can make the difference between investing in a legitimate business or squandering your money on a scam.
2. Is the person licensed and law-abiding? Find out whether the person or firm selling the investment is properly licensed in your state and whether they’ve had run-ins with regulators or received serious complaints from investors. This information is available from the Central Registration Depository (CRD), a computerized database that contains information about most brokers, some investment advisers, their representatives, and the firms they work for. The CRD also contains information about the broker’s educational background and previous employment history.
You can get CRD information from your state securities regulator. Or call the Financial Industry Regulatory Authority (FINRA) public disclosure hotline at 1-800-289-9999 or visit FINRA BrokerCheck at www.finra.org/brokercheck. Your state securities regulator may provide more information from the CRD than FINRA, especially when it comes to investor complaints, so you may want to check with them first.
3. Does the investment sound too good to be true? If it does, it probably is. High-yield investments tend to involve extremely high risk. Never invest in an opportunity that promises “guaranteed” or “risk-free” returns. Watch out for claims of astronomical yields in a short period of time. Be skeptical of “offshore” or foreign investments. And beware of exotic or unusual sounding investments. Make sure you fully understand the investment before you part with your hard-earned money. Always ask for-and carefully read-the company’s prospectus. You should also read the most recent reports the company has filed with its regulators and pay attention to the company’s financial statements, particularly if they do not say they have been audited or certified by an accountant.
The SEC has spelled out all the questions you’ll need to ask in its Ask Questions publication. When you ask these questions, write down the answers you received and what you decided to do. If something goes wrong, your notes can help to establish what was said. Let your broker or investment adviser know you’re taking notes. They’ll know you’re a serious investor and may tell you more-or give up trying to scam you. The SEC has developed a form for taking notes. You can get this and other useful publications by visiting the Investor Information section of the SEC’s Web site at www.sec.gov/investor or by calling 1-800-SEC-0330.
Smart Questions to Ask
So how do you protect yourself from scams? The first and most important thing to do is make sure you know exactly what you are agreeing to or purchasing. Ask for time to review the documents. If the sales person is pushy and stresses the importance of signing the documents immediately, it is likely to be a scam. Also, be sure you understand your options. Ask lots of questions. A legitimate businessperson will be happy to answer your questions and provide any help they can. Below is a list of questions to ask and consider before signing documents or purchasing services:
– What array of services do you offer?
- Look for organizations that offer a variety of services that can be tailored to fit your needs. If there is only one product available and they insist it is best for your situation, you should consider looking elsewhere.
– Are you licensed to offer your services in my state?
- Many states have licensing requirements for different types of professionals. Attorneys, for example, must be licensed in the state where they practice. Often credit counselors and financial planners will have licensing requirements as well. Do not hire an organization that has not fulfilled the requirements in your state.
– Do you offer free information?
- The FTC advises that you should avoid organizations that charge for information about the nature of their services.
– Have other consumers been satisfied with the service they have received?
- Before doing business with an organization, check them out with your state Attorney General, local consumer protection agency and Better Business Bureau. These organizations can tell you if other consumers have filed complaints about them. The absence of complaints is not a guarantee that the business is legitimate, as many scammers change their business name frequently, but complaints from other consumers can alert you to problems. Ask for referrals.
– What are your fees? Are there set-up and/or monthly fees?
- Get a detailed price quote in writing, and specifically ask if all fees are covered in the quote. If a business or organization won’t put its prices in writing, you should find a different business to work with.
Finally, it is important to have qualified professionals review all contracts, particularly those involving investments, before you sign those documents.
How to Get Information About Companies
Many investment scams involve small microcap companies that don’t file reports with the SEC. Professional stock analysts regularly research and write about larger public companies, and it’s easy to find their stock prices in the newspaper. In contrast, information about microcap companies can be extremely difficult to find, making them more vulnerable to investment fraud schemes. It’s easier for fraudsters to manipulate a stock when there’s little or no information available about the company.
If you’re working with a broker or an investment adviser you trust, you can ask him or her to get you written information about the company and its business, finances, and management. You can also get information on your own from these sources:
- From the company. Ask the company if it is registered and files reports with the SEC. If the company is small and unknown to most people, you should also call your state securities regulator to get information about the company, its management, and the brokers or promoters who’ve encouraged you to invest in the company.
- From the SEC. A great many companies must file their reports with the SEC. Using the EDGAR database, you can find out whether a company files with the SEC and get any reports of interest to you. For companies that do not file on EDGAR, contact the SEC’s Office of Investor Education and Advocacy by calling 202 551-8090, sending a fax to 202-772-9295, or sending an e-mail to PublicInfo@sec.gov.
- From your state securities regulator. Even though the company does not have to register its securities with the SEC, it may have to register them with your state. Your regulator will tell you whether the company has been legally cleared to sell securities in your state. Contact your state securities regulator to find out whether they have information about the company and the people behind it. Too many investors could easily have avoided heavy and painful financial losses if they had only called their state securities regulator before they bought stock. Look in the government section of your phone book or contact NASAA at 202-737-0900 or www.nasaa.org to get your state regulator’s name and phone number
- From other government regulators. Many companies, such as banks, do not have to file reports with the SEC. But banks must file updated financial information with their banking regulators, and that information is often available for free on government Web sites. Visit the Federal Reserve System’s National Information Center of Banking Information site at www.ffiec.gov/nicpubweb/nicweb/nichome.aspx, the Office of the Comptroller of the Currency at /www.occ.treas.gov, or the Federal Deposit Insurance Corporation at
- From reference books and commercial databases. Visit your local public library or the nearest law or business school library. You’ll find many reference materials containing information about companies. You can also access commercial databases for more information about the company’s history, management, products or services, revenues, and credit ratings. Although the SEC cannot recommend or endorse any particular research firm, its personnel, or its products, you may consult a number of commercial resources, including Bloomberg, Dun & Bradstreet, Hoover’s Profiles, Lexis-Nexis, and Standard & Poor’s Corporate Profiles. Ask your librarian about additional resources.
- The Secretary of State where the company is incorporated. Contact the secretary of state where the company is incorporated to find out whether the company is a corporation in good standing. You may also be able to obtain copies of the company’s incorporation papers and any annual reports it files with the state. You’ll find the name and address of your state’s secretary of state in the government section of your phone book.
Caution If you’ve been asked to invest in a company but you can’t find any record that the company has registered its securities with the SEC or your state or any reason to believe that it’s exempt from registration, call or write your state’s securities regulator or the SEC immediately with all the details. You may have come face to face with a scam.
What to Do if You Run into Trouble
Act promptly! By law, you have only a limited time to take legal action. If your problem is with a broker, follow these steps to solve your problem:
- Talk to your broker and explain the problem. What happened? Who said what, and when? Were communications clear? What did the broker tell you? Did you take notes about what your broker said at the time? If so, what do your notes say?
- If your broker can’t resolve your problem, then talk to the broker’s branch manager.
- If the problem is still not resolved, put your complaint in writing and send it to the compliance department at the firm’s main office. Explain your problem clearly, and tell the firm how you want it resolved. Ask the compliance office to respond to you in writing within 30 days.
- If you’re still not satisfied, then send a letter to your state securities regulator or to the Office of Investor Education and Advocacy at the SEC along with copies of any letters you’ve sent already to the firm.
You can get the name, telephone number, and address of your state securities regulator by calling NASAA at 202-737-0900 or by visiting NASAA’s Web site at www.nasaa.org.
The address for the SEC’s Office of Investor Education and Advocacy is:
Office of Investor Education and Advocacy
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-0213
Phone: 202-551-6500; Toll-free: 1-800-SEC-0330
To help protect yourself and learn to recognize fraud, check out the unbiased resources below and follow the action steps at the end of this unit.
Alliance for Consumer Fraud Awareness http://www.fakechecks.org
Anti-Phishing Working Group http://www.antiphishing.org/
Better Business Bureau http://us.bbb.org/
Consumer Federation of America http://www.consumerfed.org/
FBI Internet Crime Complaint Center http://www.ic3.gov/
Federal Trade Commission: Bureau of Consumer Protection http://www.ftc.gov/bcp/
Financial Industry Regulatory Authority (FINRA www.finra.org/Investors
National Association of Attorneys General http://www.naag.org/
National Association of Consumer Agency Administrators http://www.nacaa.net/
National Consumers League http://www.nclnet.org/
North American Securities Administrators Association www.nasaa.org/investor_education
Office of Investor Education and Advocacy, U.S. Securities and Exchange Commission www.sec.gov/investor
- Get a copy of the SEC’s Form for Taking Notes, so you remember what questions to ask when someone calls to sell you an investment.
- Keep notes of your conversation when you talk to a financial professional who makes recommendations.
- Get the name of your state state securities regulator and put the phone number in a handy place.
- Visit FINRA BrokerCheck and check out the background of an investment professional, contact your state securities regulator for information regarding the same individual, and then compare the information you received.
- Download and print out information about investment opportunities you read about online if you think you want to consider investing. If you later decide to invest, you’ll have proof of the offer.
- Visit the Web site, www.growthventure.com, to learn about investment fraud and how to avoid it.
- Maintain a filing system to keep all confirmation slips, statements, and notes about each investment.
- Ask to be put on the “do not call” list if a salesperson’s calls are annoying you.
- Read OnGuard Online’s investing online module, and play the site’s Invest Quest game to test your knowledge.
- Report any suspicious sales activity to your state securities regulator and to the SEC.
- Read How the SEC Handles your Complaint or Inquiry on the SEC’s Web site.
- Read about persuasion tactics in a FINRA Investor Education Foundation fraud guide available at www.pueblo.gsa.gov/cic_text/money/fighting/fraud101.htm. Then listen to an online audio clip of real life sales pitches available at www.finrafoundation.org/Senior%20Summit%20Montage.mp3, and identify and write down three tactics used in the audio clip.
- Use SaveAndInvest.org’s Risk Meter to see whether you share some of the characteristics and traits of many investment fraud victims.
- Watch two investment fraud stories from “The Lure of Money.”
- Attend a seminar sponsored by your local Cooperative Extension office or local community college.
This unit was originally written as a cooperative effort of several staff members of the Office of Investor Education and Assistance at the U.S. Securities and Exchange Commission (SEC) and has been updated from time to time. In August 2007, the Office of Investor Education and Assistance changed its name to the Office of Investor Education and Advocacy (OIEA). For more information about OIEA, go to www.sec.gov/investor. If you have a complaint or question about your investments, call 1-800-732-0330 or send an e-mail to firstname.lastname@example.org.
Additional content was inserted by Janie Simms Hipp, J.D., LL.M, and Shannon Mirus, J.D., LL.M. (Agricultural Law). Hipp is the National Program Leader for Farm Financial Management, Risk Management Education, Trade Adjustment Assistance, and the Beginning Farmer and Rancher Development Program with CSREES-USDA, the federal Cooperative Extension partner. She holds a B.A. in Social Work (Oklahoma City University), a J.D. (Oklahoma City University School of Law) and an LL.M. (University of Arkansas, Fayetteville) and has worked for over 20 years in the area of agricultural law and agricultural legal education. Mirus is a Staff Attorney with the National Agricultural Law Center, the nation’s leading source for national and international agricultural and food law research and information. She has a B.S. in Agricultural Business from the University of Arkansas, and has completed course work in the Agricultural Law LL.M. program. She works on a variety of issues at the Center including landowner liability, agritourism, women’s issues in agriculture, and risk management, and is licensed to practice law in Arkansas.