Protecting Yourself Against Fraud

It is difficult to check on an investment. There are no tires to kick and you can't take it on a test drive. Key facts may be presented in a way that's hard to understand or they may be completely invented. Furthermore, the people making the investment sales pitch are often fast talking and persuasive, convincing their victims to part with their money before they've even had a chance to consider whether or not the investment is right for them. These con artists often hold themselves out as successful business people with impressive office locations and official looking publications.

Every year, Americans lose billions of dollars to swindlers who prey on people's greed and concerns about the future. The best way to defend yourself from would-be crooks is to always be on the offensive. By learning about the different kinds of securities fraud and being able to recognize the warning signs, you can avoid becoming a victim.

There are many investment opportunities awaiting you.  As an investor, your task is to identify those investments with the greatest potential while meeting your personal investment goals. You may be solicited by phone calls, e-mail, postal mailings, or even door-to-door salespeople. Most investment scams begin on the phone or by e-mail. Be prepared to deal with investment scam artists.

Before you send money to anyone, investigate the company making the recommendation, the salesperson, and the investment opportunity by asking questions and checking references. You can begin by contacting the Attorney General's office.

Be familiar with common investment scams and be ready. Have a set of questions to ask callers. Being prepared allows you to assert yourself and helps you detect offerings that sound too good to be true and callers who are suspiciously resistant to your questions.

Make sure you thoroughly understand the investment and its risks before you invest. Be informed and certain of what you're buying and who you're buying from before you invest.

Legitimate investment professionals encourage you to ask questions and to have as much information as possible. They want you to clearly understand the risks involved. They want you to feel comfortable with the investments you are making. Con artists want you to believe them and not ask questions. All they're after is your money.

Warning Signs: Techniques typically used by Crooks

High Pressure Sales Tactics
Beware of sales pitches, whether from individuals or in ads, that urge you to get in on the ground floor or to act at once. Avoid being pressured to make a quick purchase at a "low, low price," to buy now because "the deal is only good for today," or overreact to being told "don't be a fool," or "when this becomes public knowledge people will be lined up to take advantage of this golden opportunity." Shady promoters may even offer to have an express delivery service pick up your check! They don't want you to take time to think, read the small print, or let you discuss the investment with a third person.

Promises of Exorbitant Profits
No honest investment or business is built on quick, astronomical profits. If it sounds too good to be true, it probably is.

Claims of No Risk or Minimal Risk
Return on investment is guaranteed. Assurances that "you can't go wrong" are a sure tip that you are being conned.

Evasive Answers and Lack of Communication
Con artists don't want you to ask questions. Instead, they will answer by asking you questions. These are usually ones intended to get a positive response. "You would like to make more money, wouldn't you?" A promoter's unwillingness to provide details and written information or to respond directly to inquiries should diminish your enthusiasm. He or she is probably hiding something.

Withholding written information and references
A swindler may try to convince you that there isn't time to provide something in writing. Getting something in the mail, however in any event, is no guarantee that the investment is legitimate. Slick brochures and glowing testimonials can be filled with falsehoods and distortion.

Requesting your checking account or credit card number
Callers may claim to need your credit card or checking account number in order to verify that you are a reputable customer, or to show your good faith in this special deal. Once you provide this information, it's used to make fraudulent purchases.

Offer to pick up the money at your home
It is common for swindlers to avoid traditional forms of shipping to protect themselves from prosecution under federal postal fraud laws. If a sales person offers to send a courier to pick up money, this should raise a red flag.

Promise of a free gift or trip
When signing an acceptance form for a gift that the consumer has "won," it may actually indicate that the victim is purchasing additional items. Before signing any form, read the fine print carefully.

Avoid Any Investment that isn't Clearly Described in Detail
Swindlers often declare that the specifics are "too technical" to describe in layman's terms or that the information is "classified" or "confidential." Don't buy it. A prospectus must accompany all investments. If it is that complicated, you probably don't want to be involved. Don't invest on the basis of trust, even with people you know.

Unprofessional Conduct
They refuse to return phone calls, answer correspondence, or give out their phone number and physical address. Callers can only get an answering machine. They always want to meet you someplace other than their offices. These are all warning signs of fraud. The con artists may have fancy offices, cars, and professional receptionists. If they weren't slick, they wouldn't stay in business very long.

Promises of "Inside Information"
Never buy on the basis of rumors, hot tips, "insider information," an unannounced breakthrough, or the seller's ability to predict future events.

When hounded on the phone by a promoter, don't be afraid to hang up without explanation. You do not owe the caller anything. This kind of solicitation is an invasion of your privacy. If you have any doubts make no promises or commitments, no matter how tentative. It is far better to wait and lose an opportunity than to take the plunge and lose everything.

Asking questions like those presented above aren't likely to produce honest answers, but the fact that you are asking questions can cause a con artist to discontinue the conversation. However, even if you ask the right questions, experienced con artists can skillfully, albeit dishonestly, answer your questions. They can evade answering them by asking you questions like "you don't want to lose out on this tremendous opportunity, do you?" or, "wouldn't you like to never have to worry about money again?" Don't let them feed on your fears or greed.