July 15, 2019

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8 Tips to Protect Yourself from Investment Fraud

Fraudulent investment schemes cost Americans $10 to $40 billion per year. There are several different types of investment fraud including:

  • Ponzi schemes
  • Pump and Dump scams
  • Boiler Rooms
  • Microcap Fraud

The majority of victims are elderly as con artists prey on them because they are often seen as easy targets. If you or an elderly loved one have been a victim of an investment scam, you should consider seeking help from an attorney about recouping your money. At a minimum, you should report the fraud to state and local authorities so they can pursue the criminals and help prevent others from being harmed by the same scam.

Here are eight tips to help avoid becoming a victim of investment fraud:

Know What You’re Buying

Informed decisions cannot be made unless you understand the investment you’ve been recommended. Have the investment advisor thoroughly explain the investment vehicle until you understand it. Do not let anyone rush you into giving them your money, no matter if they are an advisor, friend or relative.

Con Artists are not Always Strangers

It is important to understand that not everyone trying to bilk you is a stranger. Relatives or friends may recommend fraudulent investments to steal your money. Always ask for information in writing about any proposed investments.

Check Manager’s Investment

If someone is recommending an investment to you, find out how much money the investment manager has put into it. If it is a good vehicle, a manager will often have some “skin in the game” or have invested his own money. If they haven’t, it may raise questions as to their belief in the value of it as an investment opportunity.

Research Regulatory Oversight

Find out what type of regulatory overnight exists for the investments that have been recommended to you. Oversight varies by type of investment firm and those located overseas may not be under the same legal requirements as they are in the United States. Check to see how the investments you’re considering putting money into are regulated.

Avoid Email and Telephone Solicitations

Unless you know who is contacting you, do not put your money into proposed investments. Always ask for information in writing and never give any personal or financial information over the phone or in an email. Take a note of where the email is coming from as many investment and money scams come from third world countries.

Read Financial Statements

Always go over any financial statements you receive, whether it is for a checking account or an investment. This is the best way to spot suspicious transactions on your accounts. Although they may be mistakes, they could be attempts at fraud as well.

Diversify Investments

Spread your money around and avoid putting more than five percent of your investment money into any one security. This will help you avoid fraud and losing a significant amount of your assets if a particular investment is fraudulent.

Resist Pressure to Invest

Many fraudulent offers are promoted as “once in a lifetime chances” and people are pressured to make investment decisions immediately. If you feel pressured to make decisions “right now,” walk away. You may end up avoiding a major loss.

When it comes to investments, live by the adage, if it sounds too good to be true, it probably is.  

The article was written by LA, CA investment fraud attorney. You can find more information and legal advice to investors in their blog.

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