Protect Yourself from Investment Scams

9/7/2012

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Before you invest your earnings, it is important to check for scams and verify credibility of the investment firm. Asking questions, research the company, reach out to local investment firms and advisers, talk to other investors. It’s essential to take precaution with all investment opportunities.

Studies show that investment scams are on the rise over the past decade. Baby boomers in particularly are more vulnerable to such schemes, as many are now managing their own retirement account. In 2010, state securities regulators initiated more than 1200 enforcement actions, including criminal complaints and cease-and-desist orders, involving investors ages 50 or older, according to the North American Securities Administrators Association. That was more than double the 506 cases in 2009.

FINRA Investor Education Foundation, specializing in investment fraud, has a plethora of valuable information to help you sort through your next investment decision making. FINRA has provided three key strategies you can use if you aren’t certain about a specific investment opportunity:

1. End the conversation

Practice saying “No”. Simply tell the person, “I am sorry, I am not interested. Thanks you.” Or tell anyone who pressures you, “I never make investing decisions without first consulting my___. I will contact you if I am still interested.” Fill in the blank with whom ever you choose – your spouse, child, investment professional, attorney or accountant. Knowing your exit strategy in advance makes it easier to leave the conversation, even if the pressure starts rising.

2. Turn the tables and ask questions

A legitimate investment professional must be properly licensed, and his or her firm must be registered with the Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC) or a state securities regulator, depending on the type of business the firm conducts.

3. Talk to someone first

Be extremely skeptical if the person promoting the deal says, “Don’t tell anyone else about this special deal!” A legitimate investment professional won’t ask you to keep secrets.

Exercising these three key strategies will help protect you from fraudsters. Remember, the more knowledgeable you are when making investments, the less likely you are to become a victim. When making an investment there’s no urgency to race against the clock – take your time and make an informed decision.

For more information on protecting yourself from investment fraud, visit www.saveandinvest.org.

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