According to the North American Securities Administrators Association (NASAA), the number of enforcement actions against unlicensed brokers rose 34% from 2012 to 2013. Many industry experts posit that this kind of increase is typical in a bull market littered with investor optimism.
Ponzi schemes seem to be the biggest problem. In a typical Ponzi scheme, a broker or financial advisor will recommend an investment, telling potential investors that it is guaranteed to generate high returns. Rather than investing the money as promised, the operator of the Ponzi scheme pockets it, and uses money from newer investors to pay back earlier investors.
State regulators also reported a massive amount of real estate investment scams. In the average real estate scam, a broker or advisor will claim these investments will yield high rates to retirees and other "easy targets." Even if the broker or advisor is unlicensed, the high rates can still be tempting enough to lure investors.
A bull market in this digital age is a recipe for scams. Be on the lookout for brokers or advisors who promise guaranteed returns and/or extremely high returns and rates. Many scammers choose the internet to connect with their victims while others opt for face-to-face or over the phone solicitation. Before you invest your hard-earned money, do your research! Be wary of unregistered brokers and securities. One helpful tool is FINRA's Broker Check®.
If you lost money because of an unscrupulous advisor or a con-artist broker, contact a securities fraud lawyer at Meyer Wilson today to learn if you can recover your losses caused by investment misconduct.