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:
- 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.”
- 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.
- 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
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.
- 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.