Avoid Becoming a Victim of Investment Fraud

The US stock market is the envy of the world and when someone perpetuates fraudulent activity that is directly related to the NYSE, it gets a great deal of media coverage. While media coverage of scams and frauds on Wall Street is welcoming, average everyday fraudulent activity does not get the attention it deserves.  It is important to note that fraudulent investment activity doesn’t only happen on Wall Street and we’ve identified five specific red flags that you must be aware of to avoid becoming a victim. 

The nation’s economy is increasingly dependent on the success and integrity of the real estate, securities and commodities markets, amongst others.  As a result, you must educate yourself to avoid losing your pension, retirement or life’s savings. There are signs that you should be aware of to know that an investment opportunity is fraudulent. You can not rely on others because when you become aware of the fraud, it may be too late. All of the money that you’ve set aside for retirement or wish to pass on to your loved ones can all be gone. Unfortunately, most often these monies are irretrievable. 

Before me identifying the red flags, let’s identify so of the most frequent potential fraudulent investment activities.   There are hundreds of scams that take place every day, but these are amongst the most common:

  • High Yield investment fraud
  • Ponzi Schemes
  • Pyramid Schemes
  • Advanced Fee Schemes
  • Foreign Currency Fraud
  • Broker Embezzlement
  • Hedge Fund Related Fraud
  • Late Day Trading

We have provided a downloadable PDF that identifies the five red flags, defines the most prevalent schemes, explains how you can protect yourself and let’s you know what you can do if you become a victim. 

The first red flag is whether the seller is registered and licensed.  A Seller who attempts to get you into an investment that is unregistered and unlicensed is a indication that the investment may be a fraud. Obviously, this doesn’t apply to everyone or every type of investment, but you must be diligent to find out their status. Unregistered and unlicensed persons commit many of the frauds that target older investors.  

Second, the seller promises High Returns with Little or No Risk.  The promise of a high rate of return, with little or no risk, is a classic warning sign of investment fraud.  Every investment carries some degree of risk, and the potential for greater returns usually comes with greater risk.  

The seller uses high pressure techniques to get you to buy quickly.  It is unlikely that a reputable and respected investment professional will ever push you to make a hasty decision on an investment. You will never hear, “act now” or “you’ll miss out on a golden opportunity” from someone who is trustworthy. This is a massive red flag and you should be cautious of someone attempting to pressure you to make an investment decision.

Fourth, The seller offer you free Meals or any other kind of inducement to get you to attend their seminar or event.  The ultimate goal of free meal investment seminars is to lure new clients in and to sell them on high priced investment products, not to educate the public.  

Finally, if you’ve done your research and there are issues with the company or with the seller, obviously this is a massive red flag and you should proceed cautiously. 

You can check their records with the SEC, FINRA, and your state securities regulator to identify red flags for potential problems, like: (1) employment at firms that have been expelled from the securities industry; (2) personal bankruptcy; (3) termination; (4) being subject to internal review by an employer; (5) a high number of customer complaints; (6) failed industry qualification examinations; (7) federal tax liens; and (8) repeatedly moving firms.

Make sure you protect yourself because often scammers target older adults since they are perceived to be less aware.