A Necessity For
U.S. Rare Coin Market
spent over 25 years in the highly regulated world of financial
assets, as a registered investment advisor I am finding that
business practices in the numismatic arena leave much to be
Criticizing marketplace conditions is not just
"complaining to complain", since $3,500 and up
transactions grant all participants definite rights of discourse,
if not recourse.
The concept of prior and full disclosure seems foreign to
this industry, as many coin dealers withhold information about the
net quality and relative pricing of a particular coin in order to
affect a sale or a purchase.
It is strictly up to the customer, under the age-old tenet
of caveat emptor, to
acquire an advanced numismatic knowledge level that is comparable
to or superior to the coin broker or dealer with which he or she
Alternatively, the novice or intermediate level collector
must rely primarily on the fact that past business transactions
have appeared to be fair and beneficial with a particular party or
the business reputation appears spotless.
Granted, there are many instances were it is a combination
of these elements of both expertise and trust that prevails, but
this industry poses way too many pitfalls for the novice collector
in relation to the not inconsequential monies and time-to-transact
Certain rules of the road, imposed by an impartial,
attentive, and reasonably funded third-party governmental agency,
are required to level the playing field between those in the know
and those who want to participate at the customer, collector, and
As a laissez faire kind of guy, I cringe at the mention of
government regulation, but this is one Wild West show that needs a
master of ceremonies.
minimum, here are some of the mandated changes in industry
practices I would recommend:
1.) Complete and standardized written descriptions of
all rare coins for sale over $5,000 to be contained on the customer's invoice that
address most visible/noteworthy marks and/or discolorations,
presence or absence of original toning or patina, degree of
fullness of strike with respect to specific series, date, and
mintmark, state of original luster, etc.
At a minimum cover the traditional elements of eye appeal,
although highly subjective, luster, strike, and most obvious
If the dealer or seller has any prior knowledge or observed
that the coin has been altered in any manner, this fact must and
will be disclosed to the prospective purchaser before the fact,
not after, possibly by a third party.
disclosure of the seller's original cost for the rare coin,
current Bluesheet and Greysheet wholesale bids for the item, and
the percentage markup over seller's origin cost that the purchaser
will be paying in the final negotiated price.
Cracked out and upgraded coins or hoards present a rarefied
circumstance in disclosing cost which may be 100's of percentage
points under the asking price, but what would a reasonable man
require to make an informed decision on relative value?
An average retail comparison can be provided based upon
Coin World Trends and/or Numismedia.com price data to support the
reasonableness of the final price or what the secondary/resale
market is offering (versus the primary heavily marketed market).
Rare coin buyers must know at the time of purchase what
amount of appreciation will be required to attempt to breakeven on
the purchase to include the normal discount from retail that a
seller will experience when possibly selling back to the original
or to another dealer.
3.) Written disclosure of the combined population
counts for the rare coin utilizing both N.G.C. and P.C.G.S. totals
to assure that true relative scarcity will be reflected in any
representation of rarity made to the prospective customer.
Counts for I.C.G. may eventually be required to be
incorporated, but single service counts distort the overall
4.) If a buy-back or repurchase guarantee is presented
in any fashion within advertising copy or within the customer
invoice, the dealer must disclose under what conditions, either
market or business, that he/she would be unable to fulfill this
However, in all cases, should any rare coin be proven by a
third-party grading service or other recognized numismatic expert
to have been altered, cleaned, or doctored in a fashion not
originally disclosed to the purchaser, the dealer agrees to
provide immediate cash payment for repurchase upon notification in
writing, with requisite supporting documentation, of said
This is a logical extension of the "genuine"
guarantee often provided today which will become mandatory under
In any negotiations to purchase or sell a rare coin
to any involved party, professional or retail, no material
omissions of fact or misrepresentations of fact will be willingly
or knowingly made to effect the transaction in question.
Lack of sufficient numismatic knowledge may cause
occasional errors to occur in the course of business, but a
pattern of behavior eliciting hyperbole, exaggerated statements of
condition and value, and omissions of material fact will
constitute grounds for expulsion from the numismatic industry for
a period of no less than 7 years.
This is another instance where licensing or certification
are critical to establish a progression of punitive measures
applied against specific and/or a cumulative series of violations.
6.) Potential conflicts of interest that would
potentially influence a dealer's representation of the merits of a
particular rare coin in inventory must be fully disclosed to a
Some of the more egregious situations today include
marketing organizations whose members also have ownership and/or
corporate positions in a specific "third-party" grading
service that is used exclusively for the certification of a major
cache of raw U.S. rare coins.
The appearance of "arms length" transactions must
be maintained in all circumstances, or the full extent of the
potential conflicts of interest and lose of objectivity must be
fully disclosed in advance to any prospective customer.
7.) Licensing of all U.S. rare coin dealers conducting
individual transactions over $3,500 with mandatory professional
qualifications to include the certification of
"numismatists" through standardized testing to attain
Master, Apprentice, and Novice levels of knowledge.
All dealers conducting business with out-of-state customers
must have access to a minimum of one certified Master Numismatist,
either in-house or under contract.
Consider this list just a starting point, to get the discussion
going so to speak, for I know from the requested feedback I have
gotten from several well-known numismatists and 30-year plus
veteran coin dealers that these may be fighting words.
Personally, I know that I'm ready to fight when I spend
$5,900 on a $1 Gold Indian Princess MS65 from one of the
supposedly top dealers in the country, and find on resale that
this P.C.G.S. coin has been doctored.
And if anyone even suggests that I am "complaining to
complain", spare me the reverse psychology, condescension,
and just show me the money.
Whatever agency is given expanded and more defined powers
to regulate the U.S. rare coin industry with well-defined punitive
actions and enforcement for transgressions, it will best be at the
Federal level to assure uniformity of administration and adequate
professional associations such as the A.N.A. and P.N.G. have
clearly stated Codes of Ethics for members, but it is somewhat
unclear to myself (and I am sure to many collectors and consumers)
what are the mechanisms for enforcement?
Are adequate resources available to monitor and enforce
compliance, and are any stated penalties for transgressors
sufficient to encourage full adherence to the stated codes at all
The Federal Trade Commission has done a very spotty job in
monitoring this "high ticket item" resale business,
running hot and cold as to the amount of resources and actions
taken, with concentration obviously only upon the most visible and
damaging breaches of the public trust.
when a marketplace and the organizations that participate within
it provide a level playing field for both the experienced and
the inexperienced consumer can they hope to reach levels of public
acceptance and trust approaching the regulated securities industry
The numismatic industry is too fraught with the
shortcomings enumerated above to promote the entrance of millions
of new collectors and investors who have come to expect fully
monitored integrity on behalf of all intermediaries.
This is not to suggest that there are not problems with the
execution of securities regulation today within the financial
Due to the length and level of the unprecedented U.S. bull
market in stocks, these transgressions are increasing, but still
remain a small percentage of the total annual transactional value
of the industry. Well-established and publicized SEC ground rules
are in place, which require full disclosure of commissions and
mark-ups by intermediaries, full disclosure of real or potential
conflicts of interest, restrictions on misleading representations
of value to include omissions of fact, and standardized payment
settlement terms to include the timing of change of legal
Without similar regulations or, at a minimum, enforced
standards, the numismatic or rare coin industry today cannot hope
to compete for the collectible or investment dollar that would
otherwise come its way.
And even with increasing budgetary constraints on the
Federal and state securities regulators, financial market
participants know that there is the manpower and resources
available to provide a basic deterrent to blatant abuses.
The appeal of tangible or hard assets that embraces rare
coins is growing daily to stock investors who have come to realize
that technology and dot.com equities can go down 30% to 50% even
faster than they went up.
Diversification in investing is one of the key tenets to
long-term success, and a long-term cyclical re-emphasis into
tangibles probably began as early as mid-year, 1997.
it takes to bring on punitive government regulation is a highly
publicized rare coin marketing scam that defrauds many consumers
from several States and entails millions of dollars of lost value.
There could be several of these gross transgressions
brewing in the cauldron of public opinion in coin collecting as we
go to press.
Usually, consumers don't realize they have been taken for
many shekels too many until they decide to sell.
So the time between misrepresentation and realization can
be several years.
Should we enter a much more difficult economic period ahead
(and the probability is greater than 50% currently), one can rest
assured that the political forces that pull the levers of
legislative power will be looking for any and all players who have
egregiously breached the public trust in any pecuniary manner.
Call it scapegoating or pure politics, the result is the
same ----- heavy-handed government intervention on both the
deserving and undeserving.
And the publicity and grandstanding that usually accompany
this process is not favorable to the products of the targeted
shenanigans within numismatics today would not pass the acid test
(no pun intended for you "curators" out there!) of
general public opinion, especially a public accustomed over the
last two decades to the rigors of disclosure in the financial
Many quietly accepted practices in numismatics today would
never survive the smell test in the financial world.
One does not have to ponder very long the rationale of the
indirect submission process for the burgeoning Independent Coin
Grading Service, which to date has done an admirable job of
eliminating the influence of dealer relationships on the critical
and purportedly unbiased grading process.
if we want to grow the U.S. numismatic marketplace to its full
potential and avoid the regulation of most numismatic material by
a Federal agency much more punitive and active than the current
FTC, then all collectors, dealers, brokers, and auction companies
had better do a much, much better job of providing a level playing
field for the end buyer and seller.
There is enough money to be made in this trade at a highly
ethical level without the shenanigans of curating, misrepresenting
collectible value, overcharging, doctoring, hyping, etc.
In the end, if there is to be a major bull market in U.S.
rare coins in the quarters and years immediately ahead, then it
can only occur with increasing participation on the part of the
securities investing public as it re-allocates funds to
To gain their full trust and business will be no easy task.
They are used to very high standards of conduct.
Should a major coin scam hit the media and the internet
prior to the stock market forcing more investors to take chips off
the table, all coin dealers are advised to update their resumes.
KNOWLEDGE IS POWER WHEN YOUR HARD-EARNED MONEY IS AT STAKE.