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Recovering Losses Caused By Investment Misconduct

Five Investor Protection Tips To Avoid Investment Fraud

Fend Off Investment Fraud with These Five Investor Protection Tips

Con artists and fraudsters tend to use the same tactics over and over again, which makes identifying the red flags of investment fraud relatively easy for an educated, vigilant, and prepared investor. Promises of guaranteed riches; “warnings” that an offer “won’t last long;” vague answers to questions; hyped-up (and unverifiable) “expertise;” and assurances that your neighbor, boss, pastor, or best friend is “in” on the opportunity are all signs you should run for the hills. But, it’s human nature (particularly in this economic climate) to wonder if we’re missing out on the “next big thing” by being too careful. To find out whether that “hot” investment opportunity is really the latest investment scam, follow these tips:

  1. Insist on filing out all account paperwork yourself. Unscrupulous promoters, advisors, or brokers sometimes falsify information on client documentation in order to perpetuate their schemes. To ensure this doesn’t happen to you, complete the paperwork yourself, and never leave anything blank. If something doesn’t apply to you, write “N/A.”
  2. Refuse to make a check directly payable to a broker or adviser. Many con artists prefer checks made out to them so they can deposit their “clients” funds into their personal accounts. Never agree to this – for any reason. Always insist on writing a check payable to the firm or company where your money is being held.
  3. Ask for instructions on how to access your account online or through the custodian. Fraudsters like to be the only point of contact for their victims, because it enables them to disseminate falsified information about the status of their victims’ accounts. Insisting on being able to verify your account information through a third party increases the odds that you’ll be able to uncover any unauthorized or fraudulent activity immediately.
  4. Find out how the broker, advisor, or sales person gets paid. While many time-pressure tactics are used to lure unsuspecting investors into making quick decisions based on unverified information, some are based on the financial professional’s desire to meet a sales quota, earn a particular commission, or obtain a bonus. Finding out how the promoter, broker, or advisor gets paid, helps ensure you’re not getting roped in to an investment based on (at best) a significant conflict of interest.
  5. Research any financial designations, credentials, and/or background expertise a salesperson, broker, or advisor uses to market him- or her-self. Fraudsters often scam victims by lying about their credentials, experience, and backgrounds. Use online tools, like FINRA’s BrokerCheck, to find out if the claims are true.
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