Investment Fraud (also known as Securities Fraud) is a term that covers a wide range of illegal activities involving the deception of investors or the manipulation of financial markets. We’ve all heard the timeless saying “If it sounds too good to be true, it probably is.” As an investor, these are good words to live by. The trick is knowing when “good” becomes “too good.”
Common Investment Scams
- Ponzi schemes: this is an old scam with a simple formula: Scammers promise high returns to investors. Money from new investors is used to pay previous investors. These schemes eventually collapse – leaving most of the investors with a financial loss.
- Unscrupulous financial advisers: Some advisers cut corners or resort to outright fraud or bilk older adults with unexplained fees, unauthorized trades or other irregularities.
- Affinity fraud: A scammer pretends to be a member of a religious organization, a military or an ethnic group in order to win the trust of a member or members of the group. Those committing affinity fraud often use symbols, language, and iconography to appear associate with a specific group in their solicitations.
- Internet fraud – the “Dot-Con.” Using the internet, it is easy for con artists to reach millions of potential older victim at a minimal cost. This form of fraud is constantly evolving. Scammers often design email and social media accounts to appear as legitimate businesses or even family members.
- Inappropriate or fraudulent annuity sales: Variable annuities are often pitched to seniors through “free lunch” investment seminars. These products can be unsuitable for many retirees and are sometimes sold by salespersons who fails to disclose steep sales commissions and surrender charges that impose costly fees or penalties for taking the money out before the maturity date.
Investment Safeguards
Consult the CFPB consumer guide Know Your Financial Adviser to help you ask the right questions if you’re shopping for an adviser with expertise in senior financial planning.
The views, information, or opinions expressed in this article are solely those of the author and do not necessarily represent the views of Citizens State Bank and its affiliates, and Citizens State Bank is not responsible for and does not verify the accuracy of any information contained in this article or items hyperlinked within. This is for informational purposes and is no way intended to provide legal advice.