“Top Ten Investor Traps: Investigate Before You Invest”

NASAA PODCAST SERIES: The Alert Investor

EPISODE 5: “Top Ten Investor Traps: Investigate Before You Invest”

[INTRO MUSIC]

Investing is a long journey often filled with twists and turns before you reach your destination. Unfortunately, the path to safe investing is often littered with traps designed to catch unwary investors.

No one wants to be trapped by a fraudulent investment . . . but unfortunately con artists are continually searching for ways to separate you from your savings …. So how can you forgo these fraudsters from the get-go?

More today in the Alert Investor… brought to you by NASAA…the voice of state and provincial securities regulators.

Although NASAA members see scores of fraud cases every year, not all investor traps are outright cons.

Generally, investor traps are baited with slick sales pitches promising high returns for little or no risk. But some investors also can be trapped by legitimate investment products that are suitable for some investors, but not all.

To help investors avoid the potential pitfalls on the path to safe investing, NASAA has develop a list of “Top Ten Investor Traps.” Here’s this year’s list, in alphabetical order:

Affinity Fraud . . . Foreign Exchange Trading . . . Internet Fraud . . . Investment Seminars . . . Oil and Gas Scams . . . Prime Bank Schemes . . . Private Securities Offerings . . . Real Estate Investment Contracts . . . Unlicensed Individuals & Unregistered Products . . . and Unsuitable Sales.

Now that you’ve heard what to watch out for, let’s highlight a few of those traps and some tips on how to avoid them.

Affinity Fraud happens when con artists target you based on your association with a religious, ethnic, cultural or professional group.  A con artist typically gains trust with the group and pulls more people in. But remember:  investigate before you invest…no matter *who* is selling.

NASAA President Joe Borg…"Find out if these promoters are for real.  Your money is real, you certainly don’t want to give it to someone who’s going to buy a fancy boat or car with your hard earned money."

Scammers may also try to snare you while you’re surfing the Internet.  Be wary of investments being pitched through unsolicited e-mails, instant messages, and phony websites.  Remember: The internet can be a con artist’s dream – easy access to you and your money, with no “return address” if the deal goes sour.

You know that one size does not fit all – the same is true with investments.  Brokers are required to review their customer’s financial picture and recommend investments that make sense for their financial needs. Remember: an investment may be unsuitable for you if it doesn’t fit with your age or risk tolerance.

With rising oil and natural gas prices, investing in oil and gas products may seem like an easy way to make a quick buck… but traditional and alternative energy projects are highly risky and not appropriate for smaller investors.  Remember: Con artists tend to follow the headlines and you may be left holding the bag.

Be alert to other investor traps like Prime Bank Schemes.  Promoters of these scams offer to let you in on “the ground floor” of what they claim are elite products only offered to millionaires overseas.  But here’s the catch...Prime Banks do not exist...they only line the pockets of their phony promoters. Remember: Often the most sophisticated sounding investments can often be nothing more than empty promises.  

Unlicensed Individuals & Unregistered Products should be a red flag for investors.  Anyone selling securities or giving investment advice about securities must be licensed and registered. Remember: Carefully check out anyone offering to help you buy or sell securities or providing you investment advice.

Joseph Borg/NASAA President: The best thing to do before you invest?  Check with your state securities regulator; find out (pause) who it is that you are about to turned over your hard earned money to.  If something goes wrong, don’t wait, call your state securities regulator, they’re here to protect you.

To learn more about these investor traps or for tips on becoming a more alert investor… log onto our website at  N ASAA.org.

NASAA…. Because every investor deserves protection.