CDs Not As Safe As Many Investors Believe

There are risks associated with CDs, particularly higher-yield CDs purchased through a deposit broker, that investors don’t always understand.

Regulators Warn Investors Against Structured Notes

Marketed as a safer, high-yield alternative to low-yield savings accounts and CDs, structured notes are complex investments which carry significant risks.

FINRA Cautions Against Stock-Based Loan Programs

In a recent investor alert, FINRA said it has recently brought a number of enforcement actions against firms for activities related to stock-based.

FINRA Chief Tells Wall Street: Don’t Skimp on Compliance

FINRA Chief Executive Richard Ketchum stated that FINRA expects firms to comply with the new industry standards created by the Dodd-Frank financial reform law.

Five Tips to Help You Avoid Investment Fraud

Deborah Jaquith, Director of Communications, AARP Nevada State Office, offers five tips to help investors avoid investment fraud.

Been Scammed? Your Human Nature May Be Partially to Blame

According to an article, our natural human tendencies make us susceptible to fraud, especially if the person trying to con us makes a good first impression.

BrightScope Publishes Financial Adviser Disciplinary Actions on New Website

BrightScope launched a new website that features a searchable database of registered investment advisers to aid investors in finding competent advisers.

Twin Cities Man Indicted in $20 Million Securities Fraud Case

Michael Joseph Krzyzaniak, of the Minneapolis – St. Paul area, has been indicted on multiple fraud charges related to an alleged $20 million investment scam.

FBI: Main White Collar Crime in Montana is Securities Fraud

The FBI recently listed securities fraud as the major white collar crime in Montana; affinity fraud, in particular, seems to be especially prevalent.

Stay Away from Promissory Notes

Investment schemes involving promissory note fraud are on the rise in states across the nation.

Investors Warned Against Structured Products

Structured products are popular because they're represented as safe, higher-yield alternatives to savings accounts and CDs, but they carry a number of risks.

What Investors Should Know About Preferred Stocks

In an effort to increase returns in the face of low interest rates, many investors have turned to preferred stocks. According to the Wall Street Journal’s Intelligent Investor column, increased investor interest is likely due to the stocks’ relatively high rates of return (which average at about 7 percent) and the fact that preferred stocks have first claim on a fund’s dividends (“Preferred Stock: Are Those Juicy Yields Worth the Extra Risk?” Wall Street Journal, Feb. 5, 2011). Additionally, the income from preferred stocks may be taxed at a lower rate than income from some other investments, including bond income. Of course, there are problems with preferred stocks – perhaps very big ones – but, unfortunately, many investors are completely unaware of what those problems are. In his column, Jason Zweig of the WSJ summarized the pitfalls of preferred stocks for his readers: First, while preferred stocks seem to be lower risk than conventional stocks and some bonds, they are not low-risk products. The interest on the stocks can be suspended at the issuer’s will and the stocks themselves can be retired without notice (also at the will of the issuer). Additionally, the vast majority of preferred stocks are based on the financial sector, which leads to an overconcentration in one area of the economy and increases the risk of loss. Overall, the level of risk in preferred stocks typically ends up being higher than some other investments, even that of junk bonds. Second, the tax benefits of preferred stocks typically only apply if the preferred shares were held for a particular period of time. In many cases, the assets change often and the preferred shares may not be held in the fund long enough for the investors to receive the tax benefits. Since this isn’t anything the investor can control, it may be unwise to count on the lowered tax rate. About our law firm: The law firm of David P. Meyer & Associates represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.

How to Avoid Being Conned by a Fake Investment Adviser

Con artists often disguise themselves as “investment advisers” and professional sales representatives in order to solicit investments from unsuspecting people. A good way to avoid being conned by a fake is to follow these five investment Do’s and Don’ts: Don’t trust anyone who contacts you first. It’s easy for a con artist to purchase a list of names and then contact everyone on the list via telephone, email, or the Internet claiming to have insight into the “next big investment.” If you didn’t initiate contact, it’s a fair bet that the “adviser” is a fraud. Don’t trust anyone pushing a “once in a lifetime investment opportunity” that will disappear if you don’t act fast. High-pressure sales tactics are a common sign of investment fraud. If an investment adviser – even one you believe to be legitimate – doesn’t want you to spend time investigating the investment, you may want to consider that the “opportunity” doesn’t actually exist. Don’t trust anyone who says you can get high rates of return with little to no risk. In the world of investments, a high yield product is going to carry higher risk. Anyone who says otherwise is conning you. Do conduct a background check on all potential advisers through your state regulatory agency. If you see any signs of noncompliance or investor complaints in the adviser’s background, or if the adviser isn’t registered, you may want to consider placing your business – and your money – elsewhere. Do understand the investment strategy of any security you invest in. If it’s too complex or complicated for you to understand, or if the adviser doesn’t want to answer your questions or tells you its “too difficult to explain,” the investment is very likely a fraud. About our law firm: The law firm of David P. Meyer & Associates represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.

Ponzi’s Biographer Shares Tips on How to Avoid Ponzi Schemes

As the onslaught of Ponzi schemes continues, investors keep asking how they can avoid becoming a victim. Don Dunn, whose 1975 biography of Charles Ponzi was re-released after the Madoff scandal shocked the nation, recently offered these tips to investors (“Don’t be a Ponzi victim, says his biographer,” Naples Daily News, Feb. 21, 2011): • Be wary if your friends or acquaintances tell you they’ve just found the ‘next big investment’ or an ‘incredible, new way’ to make money. “A Ponzi scheme depends on the word getting around,” said Dunn. Your friends may not be meaning to lead you astray, but they could be doing so all the same. A Ponzi scheme is built on new money flooding in. If no one new invests, the scheme will quickly fall apart. • Be wary of anyone who tells you about a ‘fantastic investment opportunity’ that you can’t tell anyone else about. Ponzi schemes are typically spread only through word-of-mouth. If you hear “We don’t want to let too many people in on this!” from another ‘investor’ recognize the marketing ploy for what it is – a trick. • A red flag should pop up if you can’t understand how you’re supposed to make money. Complex investment strategies are often a defining characteristic of Ponzi schemes and other investment scams. • Be on the lookout for fraud if you can’t meet with the person who is in charge of running this ‘fabulous investment.’ According to Dunn, most investors never met Charles Ponzi. The same held true for Bernie Madoff. In almost all instances, someone else besides the main perpetrator handles the ‘investors.' • Watch out for anyone selling a deal that seems too good to be true. “It’s so easy to do, and people are greedy,” said Dunn. “It [a Ponzi scheme investment] seems like a very easy way to make a lot of money in a short time.” Remember: In general, the higher the expected return, the more risk involved. Only con artists will offer you a return of over 10 percent for little to no risk. About our law firm: The law firm of David P. Meyer & Associates represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.

If You Want to Avoid Investment Fraud, Watch Out for These Red Flags

Consistency. Like Bernie Madoff’s billon-dollar Ponzi scheme, many fraudulent investments show consistent returns – or promise consistent returns – quarter after quarter, year after year, even when the market itself is in decline. Investments fluctuate, as does the market itself. That’s the nature of investing. Watch out for anyone who promises you otherwise, or whose statements show otherwise; they are very likely running an investment scam. Excessive Complexity. Some investments are inherently more complex than others, but if a representative, advisor, or broker is unable to clearly explain a product in which she wants you to invest – recognize the lack of clarity as a warning sign that the product may be either too risky or unsuitable for you. Secrecy. If an advisor, broker, or sales rep tells you that a product’s investment strategy is “confidential” or refuses to answer your questions, you should consider the lack of disclosure a red flag. A legitimate investment opportunity will include full disclosure of the product’s underlying assets, the investment strategy, the expected rate of return, and the risks involved. If you aren’t given this information, it is very probable that either the product is a scam or the person pushing it is a con artist. Unverifiable Claims. If someone insists that he has assets or connections he can’t – or won’t – back up, you should think twice before you invest in whatever he’s selling. “International connections,” pending “inheritances,” and the ability to raise “venture capital” are all claims previous scam artists have made to rope unsuspecting investors into an investment fraud. About our law firm: The law firm of David P. Meyer & Associates represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.

Money Magazine Calls Index Annuities a Safety Trap

Many retirees have heard the pitch: Index annuities are a perfect blend of stock performance and little risk. They offer returns that go up when the market does and are guaranteed to never lose principal funds. Sounds like a great deal, and many retirees bought into it, which caused the relatively new industry to soar from $5.3 billion in sales to $29.9 billion in just nine years (“Index annuities are a safety trap,” Money Magazine, Jan. 17, 2011). Despite their popularity, however, index annuities can mean big problems for investors. They can be incredibly complex, and they often have lower returns than investors expect. Additionally, they can feature high fees and hidden expenses, especially if the investor cashes out of the annuity before the contract period is over. This last issue may be the most problematic. Recently, many investment advisors have begun advising that their clients “swap” their existing annuities for new ones, often before their existing contracts are up. (For more information about “swaps,” see our Nov. 2010 post.) This causes investors to suffer large surrender fees and/or early withdrawal penalties. But, why would an advisor recommend a product or action to their client that may not be in the client’s best interest? The answer may lie in how advisors are paid for annuity sales. In 2008, Illinois state regulators began investigating Senior Financial Strategies of Champaign, which does business as Pinnacle Investment Advisors, after the Illinois Securities Department received a complaint made by some of Pinnacle’s clients who alleged negligence on the part of the company (“Illinois Securities Department says clients incurred steep withdrawal penalties,” The News-Gazette, Sept. 27, 2010). In its investigation, the regulators found at least 15 cases where Pinnacle’s clients purchased equity-indexed annuities with funds that came from the liquidation of other annuities. None of the previous annuities were held long enough for the clients to escape steep early withdrawal penalties, but that didn’t stop Pinnacle from advising their clients to make the switch. According to The News-Gazette article, Pinnacle sold 65 equity-indexed annuities to clients in just five months and made $426,281 in commission fees. (To learn about the problems associated with equity-indexed annuities, click here.) That’s $85,256.20 per month and $6,558.17 per annuity. "When you have a market incentive to sell, sell, sell, why would anyone be surprised that there are all sorts of abuses?" said Birny Birnbaum, a former consumer representative to the National Association of Insurance Commissioners (NAIC), in the Jan. 17 Money Magazine article. Why, indeed. We’re glad that state securities regulators are beginning to address issues like this, but it’s equally important that investors protect themselves, as well. Remember: With any investment, if it sounds too good to be true, it probably is – regardless of what the guy selling it says. About our law firm: The law firm of David P. Meyer & Associates represents individuals across the country who have been harmed by investment fraud. All our cases are handled on a contingency fee and we never request a retainer of any kind. Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.

Investors Warned to Weigh the Risks of Peer-to-Peer Loans Before Investing

NASAA Warns Investors to Weigh the Risks of Peer-to-Peer Loans Before Investing The National American Securities Administrators Association Inc. issued an investor alert recently that advises individual investors to fully weigh the risks of Peer-to-Peer loans before they invest in the products.

New York's "Blue Sky" Law Offers No Immunity to Madoff Feeder Funds, Says Judge

New York's Martin Act (aka the "blue sky" law) was enacted in 1921 in order to give New York attorneys general the ability to prosecute financial firms for investment fraud. In a bizarre twist of legislative intent, the Act has since been used to dismiss court cases brought by investors against financial firms, if the firm's wrongdoing did not involve intentional fraud. That is, it was used to dismiss cases of negligence, breach of fiduciary duty, and breach of contract - particularly by firms linked to Bernie Madoff's devastating Ponzi scheme - up until recently.

Religious Broadcaster Charged in Investment Scam

The owner of the religious broadcasting company, JBS Inc., has been charged in an investment scam involving more than $750,000. Samuel Jacobs, owner of WJHJ, has been accused of using investor’s money on personal and business expenses that include a boat and a Hampton home.

Philadelphia Mortgage Scheme Leads to 4 Indictments

A Philadelphia mortgage fraud scheme operated by Anthony J. DeMarco III and his two companies, DeMarco REI and King of Prussia and OPM Group, leads to four men facing indictments.

Investment Scam Leaves New Jersey Woman Broke

A New Jersey investment scam leaves a Hoboken woman broke after a scam artist loses her money and causes her house to go into foreclosure.

Investment Fraud Leads to Guilty Plea by St. Louis Man

A St. Louis man has pleaded guilty to investment fraud involving more than $2.4 million. Randall Lynn Stuckey has been accused of defrauding more than 50 investors. He has pleaded guilty to one count of fraud and one count of mail fraud.

Illinois Man Accused of Operating $12 Million Ponzi Scheme

A Ponzi scheme results in the arrest of an Illinois man. Robert R. Anderson has been charged with wire fraud and for allegedly raising $12 million from 77 investors in an elaborate investment scam.

“CHiPs” are Down for Larry Wilcox Who’s Accused of Securities Fraud

“CHiPs” star Larry Wilcox, who played CHP Officer Jonathan Baker in the hit TV show, faces securities fraud charges for his involvement in a kickback scheme involving penny stocks.

Investors Seeking Safe Income from Bonds Lose Out on Structured Notes

Retirees and other investors seeking safe, stable returns typically invest in bonds. A bond is essentially a loan from an investor to a company or government in exchange for a promise of repayment (the principal borrowed plus a predetermined interest rate) on a set date (also know as the maturity date). Investors generally view bonds as risk-free products offering a stable return. Unfortunately, this has enabled unscrupulous brokers and sales agents to mislead investors seeking safe income into purchasing complex securities they don't understand.