How Can I Protect Myself from Being Tricked Into an Investment Scam?

Interest rates are so low that I’m looking into higher yield options for my retirement account.

The Federal Reserve recently announced that we can expect to continue seeing low interest rates well into the year 2014—and there’s no guarantee that rates will improve even then. This is disturbing news for many, and it has spurred more and more investors to start looking for alternatives to the low yields on their existing investments. The North American Securities Administrators Association (NASAA) has warned investors, especially vulnerable senior investors, to be careful not to fall prey to investment fraud as interest rates tumble.

Many Investment Scams Have These Warning Signs in Common:

  • A promise of high returns and low or no risk.
    Any investment comes with a certain degree of risk, and you’ll find that higher returns are accompanied by higher risk. If an investment seems too good to be true, it probably is.

  • Pressure to act now.
    Many fraudsters try to pressure investors into buying before they have a chance to do any research. If the seller tries to use high-pressure tactics or tells you it’s a “once in a lifetime” opportunity that won’t be around tomorrow, consider it a major red flag.

  • Lack of documentation.
    If you have trouble getting written copies of the investment’s documentation, or if you can’t seem to find info about the company, there’s a good chance something shady is going on.

What Do Low Interest Rates Have to Do with Investment Fraud?

Fraudsters watch the market and know when investors may be looking to “upgrade” their investments into something with a better rate of return. When interest rates fall, fraudsters know investors will be looking to transfer accounts and nest eggs into higher yield opportunities, and prepare their fraudulent pitches accordingly. As investment fraud attorneys, we see many cases of investment fraud, stock scams, and stockbroker misconduct in times when the economy is rough.

Ask These Questions Before Handing Over Your Cash

Of course, not every higher yield opportunity is an investment scam. However, even if you are eager to move your money somewhere to better weather falling interest rates, don’t forget to watch for the signs of investment fraud. Ask yourself these questions before you commit:

  • Did I receive appropriate documentation? With any investment, be sure you have received a copy of the prospectus or similar documentation. Read over the information, and make sure it matches what you were told about the investment.

  • Is all of the licensing and registration in order? Be sure both the person offering the investment and the investment are registered and licensed for the state you live in.

  • Does this sound realistic? High returns should come with high risk. If you are offered an investment opportunity that sounds too good to be true, it may not be all it claims to be.

For more information about the major signs of financial fraud and what to do if you lose money to an investment scam, or if you have already been the victim of investment fraud and need help with the next steps, speak with one of our investment fraud attorneys today.