Each year, investors are targeted with a variety of misleading sales tactics, or worse, outright fraud. Investors also have to be wary of unregistered activity. Members of the Sandwich Generation, adults who feel the squeeze of both their children’t educational expenses and their elderly parents’ needs, may be vulnerable to shady tactics. If any of the following has occurred to you, immediately contact your local securities regulator to determine if you should file a complaint.

Misleading Sales Tactics and Practices

Affinity fraud – In this situation salespeople are hired to target specific religious, ethnic, professional or social groups. Once a prominent member of the group invests, more people within the community decide that the product is worthwhile. Having gained the community’s trust, the salesperson then promotes the fraudulent products or services to the group at large.

Bait and switch schemes – Investors should be wary of investments that are advertised as having unusually high investment profits, especially if a personal visit is required. During the face-to-face meeting, the salesperson will discourage the investor from investing in the advertised product, switching them to a different investment altogether.

Churning – Churning occurs when a securities professional makes unnecessary and/or excessive trades in order to generate commissions. Most churning occurs when an investor grants his or her broker discretion to trade the account on his or her behalf.

Guaranteed returns – SandGEN investors may be enticed by promises of sky-high returns as they attempt to catch up on retirement planning. Registered brokers and financial advisers are prohibited by law from guaranteeing a rate of return on securities products.

Free meal seminars – Investors are invited to receive a free meal and hear about investment opportunities. While free meal seminars may be a legitimate method in which to obtain new clients, some seminar salespeople may try to sell you unsuitable investments or convince you to replace your existing investments. They may also fail to disclose their fees or commissions, making it difficult to accurately compare products and services. Others may use these seminars simply to obtain your personal and financial information.

Misleading credentials – Some salespeople or financial advisers create the impression that they have special education or expertise in senior/retirement services. If credentials contain words such as “senior” or “retirement” in conjunction with the words “certified” or “registered”, be cautious. These credentials may be no more than a commercial gimmick. Their specialty may be more about knowing how to “sell” to seniors, and less about what may actually be in their clients’ best interests.

Unregistered Activity

Brokers/financial advisers – Would you trust your physical health to an unlicensed physician? Then, why trust your financial well-being to an unregistered securities “professional”? Brokers and financial advisers are required to be registered with local and federal regulators. (Visit the Resource Guide at the end of this booklet for contact information).

Investment products – Most investment products must be registered with the federal or state/provincial regulators where they are offered and sold. Always check with your adviser or regulator to make sure your investment funds are being placed in a legitimate investment product.

Securities Fraud

“Ponzi” or pyramid schemes – Typically a promoter offers eye-popping returns from a vaguely described opportunity. Fancy or professional-looking documents and websites are no indication of a legitimate investment. Pyramid schemes are often spread by word of mouth through groups such as religious institutions, ethnic groups, or professional affiliations, frequently in an atmosphere of secrecy. The formula is simple: Promise high returns to investors while using their money to pay previous investors.

Pump and dump scams – Unethical individuals frequently “pump” up the value of low-priced, thinly traded securities through misleading marketing campaigns. When investors begin purchasing the securities at the inflated prices, they “dump” the stock, leaving most investors holding worthless shares. Watch out for pump and dump scams appearing on spam e-mail, in unsolicited faxes, or in internet chat forums.

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