A WARNING ON COIN GRADING FOR INVESTORS
By Debra Wishik Englander

(MONEY Magazine) – Since the rare-coin market is risky and largely unregulated, many investors have begun to put their faith in services claiming to provide standardized appraisals by encasing coins in plastic slabs and grading them (see ''Simple Ways to Avoid a Painful Coin Job,'' Money Update, January, page 22). But a lawsuit filed in August by the Federal Trade Commission amounted to a sharp warning about the largest slabbing company, Professional Coin Grading Service (PCGS) of Newport Beach, Calif., whose members are coin dealers. And coin investors should take notice. The suit alleged that PCGS advertisements and literature represented its service as ''totally unbiased'' and said PCGS claimed that it ''eliminated the risk'' associated with grading. PCGS settled the suit by signing a consent decree agreeing to disclose in ads that its service is no guarantee against the volatility of the coin market. But analysts say that investors shouldn't panic and sell their PCGS-graded slabs or shares in brokerage house limited partnerships that own the coins. While attending the American Numismatic Convention a week after the Federal Trade Commission news broke, Coin World editor Beth Deisher said: 'There was no loss of confidence in PCGS-graded coins at this meeting.'' In fact, Barry Cutler, the director of the FTC's bureau of consumer protection, told MONEY that he wasn't selling his own PCGS coins. ''Coin grading is an important tool,'' he said. ''But just because you have a slabbed coin, you won't necessarily get a top price when you decide to sell.''