4 Ways to Guard against Investment Fraud

Financial Industry Regulatory Authority (FINRA)
4 Ways to Guard against Investment Fraud
.

View photo

Avoid Investment Fraud ©iStockphoto.com/Courtney Keating

Investment fraudsters tend to go after people who are college-educated, optimistic and self-reliant. They also target those with higher incomes and financial knowledge, and have had a recent health or financial change. This is why Baby Boomers and older Americans who are nearing or already in retirement are prime targets.

Fraudsters use high-pressure tactics to get people to respond right away. Stop and think before making a decision—real deals will still be there tomorrow.

Protect yourself with these four strategies:

1. End the conversation.

Practice saying “No.” Simply say, “I'm sorry, I'm not interested. Thank you.” Let them know you'll think about it and get back to them. Have an exit strategy so you can leave the conversation if the pressure rises.

2. Turn the tables and ask questions.

Before you give out information about yourself, ask:

  • Are you and your firm registered with FINRA (Financial Industry Regulatory Authority)?
  • Are you registered with the SEC (Securities and Exchange Commission)?
  • Are you registered with a state securities regulator? Which one(s)?
  • Is this investment registered with the SEC or my state securities regulator?

To verify the answers, check out the seller:

And check out the investment:

3. Talk to someone before investing.

Be extremely skeptical if the salesperson says, “Don't tell anyone else about this special deal!” A legitimate professional will not ask you to keep secrets. Even if the seller and the investment are registered, discuss your decision first with a family member, investment professional, lawyer or accountant.

4. Take your name off solicitation lists.

To reduce the number of sales pitches you receive, take your name off of telemarketing and junk mail lists.

Businesses that market to consumers get names from local phone listings, public real estate records, property-tax assessments, donations to political or charitable organizations, club rosters, alumni listings and other sources. Online advertisers use “cookies”—small data files that track information about your Web browsing patterns and items you've put into online shopping carts.

Contact the following to get off solicitation lists:

Most legitimate businesses will honor your request, so if you get a solicitation after taking these steps, you should be extremely skeptical of the offer.

Gerri Walsh is Senior Vice President of Investor Education at the Financial Industry Regulatory Authority (FINRA).

FINRA is the largest independent regulator for all securities firms doing business in the United States. Our chief role is to protect investors by maintaining the fairness of the U.S. capital markets. FINRA does not endorse, sponsor, or guarantee, nor is it sponsored by, any advertisers on this site, and any dealings with those advertisers are solely between you and the advertisers.

View Comments