The state has issued a preliminary cease and desist order against a Texas-based company accused of defrauding Hawai'i investors in a "prime bank" scheme that netted at least $630,000.

Hawai'i Commissioner of Securities Tung Chan today announced the move against JAIC Retirement Services Inc. and its president and chief executive officer, Andrew O. Steger. Chan urged consumers to watch for warning signs of potential schemes.

The preliminary order alleges the company and Steger solicited investors in Hawai'i stating that they would place the money in a "top" bank. Investors were promised a 37 percent to 45 percent profit in 370 days.

The defendants are accused of violating the state's securities registration and antifraud provisions. The preliminary order seeks permanent injunctions against future violations, as well as restitution and administrative penalties of $160,000 for each respondent.

The Securities and Exchange Commission warns that prime bank programs often claim investors' funds will be used to purchase and trade "prime bank" financial instruments on clandestine overseas markets to generate huge returns that investors will share. However, neither these instruments nor the markets they allegedly trade with exist.

Officials explain the promoters distribute documents that appear complex, sophisticated and official. The sellers often tell potential investors that they have special access to programs that otherwise would be reserved for top financiers on Wall Street, London, Geneva or other world financial centers.

Investors are led to believe that high returns, often as much as 100 percent or more, are possible with little risk.

Consumers can watch for some warning signs of a prime bank scheme, including: excessive guaranteed returns, fictitious financial instruments, extreme secrecy, exclusive opportunity and claims of inordinate complexity.