Common Investment Frauds

1. Ponzi Schemes

The premise is simple: use money from new investors to pay existing investors. The only people certain to make money are the promoters who set the Ponzi scheme in motion.

2. Affinity Fraud

Bad actors increasingly target religious, ethnic, social and professional groups. Some may be members of the group, or pretend to be, in order to gain the trust of other members. Bad actors often recruit a respected member of the group to promote their schemes by convincing them that the fraudulent investment is legitimate.

3. Unethical Sales Practices

Broker-dealers, agents, investment adviser and investment adviser representatives (collectively, “Securities Professionals”) must adhere to ethical practices in the performance of their duties on behalf of their customers. All practices of the Securities Professionals’ in connection with their securities activities in this state must be just, reasonable and not unfairly discriminatory. Examples of unethical sales practices by broker-dealers and agents include, but are not limited to, unauthorized trading, charging unreasonable fees, churning, making unsuitable recommendations, and deception. Unethical practices by investment advisers and investment adviser representatives include, but are not limited to, recommending unsuitable securities, making misrepresentations, charging unreasonable advisory fees, guaranteeing results, and misleading sales literature that describes selective prior historical results, and entering into unwritten investment advisory agreements. When advising their customers, investment advisers and investment adviser representatives engage in unethical practices if they breach their fiduciary duty to those customers.

4. Senior Investment Fraud

The growing senior population and the concentration of wealth among seniors have made this group vulnerable to investment fraud and abuse. Bad actors will specifically target seniors and prey on their trusting nature. Losses from these investment frauds and abuses may eliminate the seniors’ ability to pay for their living expenses.

These schemes involve multiple investment products including, but not limited to, oil and gas investments, promissory notes, joint ventures, certificates of deposit, life settlements, and fraudulent business opportunities.

Ways to Identify a Securities Fraudster

They like to blend in

The fraudster will disguise their true motives by blending into a group whether that be political, social, religious, or other. They most likely will dress and behave similarly to those in the group, to create a common bond and spread the fraud.

They push poorly understood or unknown products

The fraudster will try to talk down to you by making the investment sound more complicated than it really is. This might include stating that no one understands the product, terms, and conditions; however, it is a good deal.

They purport that there is no risk

Every investment involves some degree of risk. A fraudster will attempt to mislead you into believing there is no risk.

They target bad traits

Skilled fraudsters try to bring out your worst traits, particularly greed, fear and insecurity.

They try to force a rushed investment decision

The fraudster tells you that you must make your investment immediately. Remember you have the right to take your time to research and consider the risks and rewards of the investment.

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