On February 15, the Securities and Exchange Commission announced fraud charges against two brokers and a New York brokerage firm for pushing investors into risky investments in a clean energy company. The brokers were misleading in order to earn large commissions on the investments.
Although commissions and bonuses are standard procedure for investment advisors, an investor deserves to be told how much their advisor is making.
Sometimes even the most reputable looking investments, in this case a charity, is using deceptive tactics to entice investors
According to a press release by the Securities and Exchange Commission in February, 2012, a husband and wife team have been charged with defrauding seniors by selling charitable gift annuities, when in fact only a small amount was directed to the charities, and the rest went to paying high salaries and third-party commissions.
A Ponzi scheme uses money put in by later investors to pay earlier investors
Investor’s Watchdog has partnered with Page Perry, LLC to offer free videos, called Investor’s Watchdog University, in an attempt to help protect investors from financial fraud. The videos provide investors with clear explanations and definitions of the most common investment products and red flags to help investors stay protected.
No one knew the real story, that ZeekRewards was nothing but a well disguised Ponzi scheme.
According to an article from firstcoastnews.com called “ZeekRewards scam hits N.C. town hard”, ZeekRewards took at least $600 million from over one million investors, 50,000 of whom were from North Carolina.
Don’t automatically give a person credit just because they sound credible.
Keeping with the theme of red flags, let’s discuss another set of red flags that you should be on alert for. The sociopath. One in twenty-five people are sociopaths. Sociopaths can hold any job, they are highly functional and often achieve higher education degrees. We often see these people in power.
If you notice one of these red flags, it means you need to do more research into the potential investment and/or your advisor.
Sometimes it’s a good idea to review things we have already learned. In this case, I believe we could all benefit from a refresher course on the Red Flags of Fraud, as provided free to investors on the FINRA website. While not exclusive, this is a great sample of some of the most important points you need to remember. If you notice one of these red flags, it means you need to do more research into the potential investment and/or your advisor.
- Guarantees: Be suspect of anyone who guarantees that an investment will perform a certain way. All investments carry some degree of risk.
- Unregistered products: Many investment scams involve unlicensed individuals selling unregistered securities—ranging from stocks, bonds, notes, hedge funds, oil or gas deals, or fictitious instruments, such as prime bank investments.
- Overly consistent returns: Any investment that consistently goes up month after month—or that provides remarkably steady returns regardless of market conditions—should raise suspicions, especially during turbulent times. Even the most stable investments can experience hiccups once in a while.
- Complex strategies: Avoid anyone who credits a highly complex investing technique for unusual success. Legitimate professionals should be able to explain clearly what they are doing. It is critical that you fully understand any investment you’re seriously considering—including what it is, what the risks are and how the investment makes money.
- Missing documentation: If someone tries to sell you a security with no documentation—that is, no prospectus in the case of a stock or mutual fund, and no offering circular in the case of a bond or alternative investment—he or she may be selling unregistered securities. Also beware of stocks without stock symbols.
- Account discrepancies: Unauthorized trades, missing funds or other problems with your account statements can be the result of a genuine error—or they can indicate churning or fraud. Keep an eye on your account statements to make sure account activity is consistent with your instructions, and be sure you know who holds your assets. For instance, is the investment adviser also the custodian of your assets? Or is there an independent third-party custodian? It can be easier for fraud to occur if an adviser is also the custodian of the assets and keeper of the accounts.
- A pushy salesperson: No reputable investment professional should push you to make an immediate decision about an investment, or tell you that you’ve got to “act now.” If someone pressures you to decide on a stock sale or purchase, steer clear. Even if no fraud is taking place, this type of pressuring is inappropriate.
If you have some other red flags you want to add to the list here, email them to us at firstname.lastname@example.org, or mention them in the comments below. We appreciate your participation!
Part of Investors Watchdog’s mission is to make investors aware of the risks and abuses in the investment marketplace. If you would like further information, we invite you to follow this blog and to visit the investment information and blog published at www.pageperry.com.
Accused of laundering $15 million in ill-gotten profits from an investment scam allegedly run by Mutual Benefits
Recently published article “Fort Lauderdale executive convicted of money-laundering plot” on MiamiHerald.com, tells of a Fort Lauderdale executive convicted of a money-laundering conspiracy. (more…)
Individual investors have more than $1 trillion in bond investments today
Bonds are currently riskier than stocks. For example, If the yield on the 10-year Treasury bond rises to 5%, which is where it was before the financial crisis, bond funds could plummet 25%, (“Bonds are riskier than stocks,” CNNMoney). (more…)
That is not investing; it is speculation.
Investors are reportedly beginning to shun exotic and niche exchange traded funds. That has spurred sellers to market them more aggressively, because many of the more than 200 exchange traded funds launched in the past year are exotic and niche ETFs. Those who recommend them are trying to capitalize on investors’ worst instincts. (more…)
Conflicting interests are not just a by-product of Wall Street’s business, they are the very essence of it.
The Financial Industry Regulatory Authority (FINRA) is reportedly interested in examining the conflicting interests that its member firms have with their customers. (more…)
Investors are either not being told about the risks or not fully appreciating the risks.
Many fixed income investors, desperate for yield, are putting their hard-earned savings in bond funds that offer attractive total returns and yields but carry significant risk. Virtually all the experts observe that both the corporate and municipal bond markets are in a bubble that will inevitably burst and destroy many investors’ savings. The SEC has stepped up efforts to educate investors about the perils of bonds and bond funds, which have traditionally been regarded as relatively low risk. The clear message is: that is no longer the case. (more…)
Hedge fund managers blamed the poor performance on a “too cautious” approach
The Wall Street Journal reports that hedge funds gained 5.5% on average in 2012 while the S&P 500 stock index gained 16% – (more…)
U.S. District Judge Linda Reade calculated that when BLP collapsed, 111 investors were owed roughly $56 million
According to a recent article written by Courthouse News Service, Martin Sigillito of St. Louis, an attorney and an American Anglican bishop, has been sentenced to 40 years in prison. He is said to have devised the largest Ponzi scheme in local history. (more…)
Should this type of elaborately planned financial dishonesty be tolerated by FINRA?
The Financial Industry Regulatory Authority apparently tolerates certain instances of clear and unequivocal dishonesty by brokers. While the harm to investors that flows from that dishonesty may vary from Madoff magnitude to nothing, dishonesty – when it is irrefutable – should not be tolerated by an industry that holds itself out as trusted professional financial advisors. Yet it is tolerated. (more…)
“”U.S. retail investors lack basic financial literacy … have a weak grasp of elementary financial concepts and lack critical knowledge of ways to avoid investment fraud.”
A recent study by the SEC concluded that most investors understand very little about the financial investments they buy. Following the financial crisis, Congress suspected that the financial illiteracy of investors played a role in the crisis and directed the SEC to conduct a study on the subject. The SEC has completed its study and issued its report; the findings are indeed shocking. (more…)
This is essentially a market-timing strategy that is flawed in the sense that no one is a reliable market timer.
Research firm Cerulli Associates reports that adviser-run mutual fund wrap-fee programs underperformed benchmarks significantly in 2010 and 2011. Many investment managers, like many investors, move money out of the market when markets decline, and miss out on the rebound. This is essentially a market-timing strategy that is flawed in the sense that no one is a reliable market timer. (more…)
The SEC has filed a Complaint against Miami entrepreneur Claudio Osorio for allegedly misrepresenting the success of his company
The SEC has filed a Complaint against Miami entrepreneur Claudio Osorio for allegedly misrepresenting the success of his company between 2007 and 2010. Osorio claimed to be able to produce housing materials that would withstand natural disasters. He is said to have stolen almost half of the money raised to pay for his lavish lifestyle. As reported, (more…)
It is important to keep an eye on suspicious activities when it comes to your relatives. Sometimes the people who we expect to catch fraud are unable or unwilling to report it.
A recent Consumer Reports article entitled “Protecting Mom & Dad’s Money” gave readers some great insights on what to do when you suspect financial abuse. In the past they have touched on scams by strangers, but they write, (more…)
Regardless of whether you believe gold actually is a good investment or not, the question is “what can you do if you or your family member have already bought gold or silver coins, and are now looking to make sure it wasn’t a scam?”
Coin fraud has been around for ages and continues to capture more victims every year. You may have seen commercials or advertisements that spout the benefits of buying gold and silver coins as an investment strategy. Potential investors are told that these precious metals have always been around and will always be a valuable investment since the price goes up over time. Regardless of whether you believe gold actually is a good investment or not, the question is “what can you do if you or your family member have already bought gold or silver coins, and are now looking to make sure it wasn’t a scam?” Here are a few tips on testing a coins authenticity.
Securities and Exchange Commission has charged Jim Donnan, a former Georgia football coach, for violating federal securities laws by recruiting high profile coaches and players to invest millions.
CBSAtlanta.com recently published an article entitled “Hall of Fame coach Jim Donnan accused in Ponzi Scheme”, in which it reports that the Securities and Exchange Commission has charged Jim Donnan, a former Georgia football coach, for violating federal securities laws by recruiting high profile coaches and players to invest millions.