Investment Opportunities

Investment pitches come by phone, postal mail, e-mail, newspaper and magazine advertisements, TV “infomercials,” etc.  They can also come from friends, relatives, co-workers, neighbors, and members of groups or organizations you belong to.  Some may be legitimate, but many are scams designed to separate you from your money.  Remember, scam artists are skilled liars.  They often appear very friendly, are very good at sounding like they represent legitimate businesses, and have believable answers to any questions you may ask. The following tips will help you spot and avoid most types of investment scams:

  • Don’t believe claims that there is no risk. All investments, even legitimate ones, involve some risk. Never invest more than you can afford to lose.
  • Be wary of promises that you will make a good return fast. Legitimate investments require time to pay off. If the offer sounds too good to be true, it probably is.
  • Never rely solely on unsolicited investment information from an e-mail or fax, especially when the sender makes extravagant claims about its future value. Be skeptical whenever you receive a stock tip. Tipsters try to get you and others to buy the stock so the price will go up and they can sell off their shares at the inflated price.
  • Check the source of any message you receive because it may come from a company insider who is paid to advertise the stock.
  • Don’t be fooled by testimonials offered by strangers. Often these are fictitious or made by the scammers to encourage you to invest.
  • Understand what you are investing in and how your investment will be held or managed. If you are unsure about anything, discuss the investment with your attorney, accountant, or any other licensed professional before you invest. You should also discuss it with your family and trusted friends.
  • Be sure to get everything in writing. Chances are you won’t get what was promised otherwise.
  • Ask what recourse you would have if you are not satisfied with your investment or if you need to get your money out quickly. It is essential to get any warranty or refund provision in writing, and be confident that the business will honor its guarantees should that become necessary.
  • Be wary of salespeople who promise to “take care of everything” for you. Honest salespeople will make sure you understand the investment. They will also keep you informed about it so you can make appropriate decisions in the future.
  • Don’t get taken in by offers that are available right now. Don’t get pushed into making a quick decision. Take time to think about it, do some research, and discuss it with others. If you are not interested, just say so; it is not impolite to simply say “no” or hang up the phone.
  • Be wary of salespeople who ask you to send cash or transfer money immediately, or offer to send someone to pick it up.
  • Never pay for something that is “free.” Whatever you receive will probably be worth less than what you’ve paid for it.
  • Never meet with a salesperson alone in your home.
  • Don’t disclose your financial situation of provide any personal information such as your SSN or credit card number until you are confident that you are dealing with a legitimate salesperson and company. Never give out personal information for “identification” purposes.
  • Ask what state or federal agencies the salesperson’s firm is regulated by and with whom is it registered. Get the phone number and URL so you can contact the agencies to verify the facts. Don’t deal with salespeople who say their firm is not subject to registration or regulation.
  • Check the credentials and licensing of any salesperson, broker, or other person before investing.
  • If the investment involves securities, you can go to the Financial Industry Regulatory Authority’s website at www.finra.org and look up the status of brokers or brokerage firms on its BrokerCheck on its Investors page. You can also get a detailed report that includes the firm’s profile, history, operations, and disclosure events. The latter include arbitration awards, disciplinary actions, bankruptcies, etc. Also check with the California Department of Corporations at www.corp.ca.gov or (866) 275-2677 to verify that the company offering stock or other securities is registered, and that the investment opportunity is legitimate and legal. And you can see company’s quarterly and annual reports on the Securities Exchange Commission’s website at www.sec.gov under Filings & Forms.
  • Ask for the name of the firm your investments clear with.
  • If the investment involves commodity futures, you can go to the National Futures Association’s website at www.nfa.futures.org and look up the status of individuals or firms on its Broker/Firm Information (BASIC) page. You can also go to the Commodity Futures Trading Commission’s website at www.cftc.gov and look up the disciplinary history of individuals or firms under Consumer Protection.
  • Be wary of any individual or firm who offers to sell you commodity futures or options on commodities, particularly precious metals, foreign currency, and those with seasonal demands. These investments are very risky and anyone who claims otherwise may be breaking the law.