"Know what you own, and know why you own it."
- Peter Lynch

Must-Know Investor Safety Alerts

Make yourself aware these safety tips before investing your time and money ...
Crypto Trading Fraud
Fraudsters continue to exploit the rising popularity of digital assets to lure retail investors into scams.  “Digital assets” include crypto-currencies, coins, and tokens.  Investors may be less skeptical of investment opportunities that involve something new or “cutting-edge”.  Take the time to understand how the investment works and to evaluate its risks. 
High Yield Scams
Have you ever seen a website promising annual (or even monthly, weekly, or daily!) investment returns of 30 or 40 percent – or more?  The hallmark of a high-yield investment program (HYIP) scam is the promise of incredible returns with little or no risk to the investor.  If you come across an investment program that promises high returns with little or no risk, be aware that it is likely a fraud.
Investment Fees
There are always fees and costs associated with investment products and services.  These fees may seem small, but over time they can have a major impact on your investment portfolio.  When choosing either an investment professional or a particular investment, be sure you understand and compare the fees you’ll be charged.  It could save you a lot of money in the long run. 

Ponzi Schemes

A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk.

Beware of Pyramid Schemes

A pyramid scheme is a type of investment scam that fraudsters often pitch as a legitimate business opportunity in the form of multi-level marketing (MLM) programs.
Some MLM programs are actually pyramid schemes in which participants profit almost exclusively through recruiting other people to participate in the program.

Types of Investment Scams

The common thread that binds investment scams is the psychology behind the pitch. Investment fraudsters make their living by making sure the deals they tout appear both good and true. Fraudsters are masters of persuasion, tailoring their pitches to match the psychological profiles of their targets.

Investment Newsletter Fraud

Investment newsletters come in many forms.  They may be found online or in hard copy; they may be available for a fee or free of charge. While many investment newsletters are legitimate, some are used to carry out schemes designed to deceive investors, such as pumping up a company’s stock price by making false and misleading statements to create a buying frenzy, and then selling shares at the pumped up price.

Investment Seminars

Investors may encounter potential fraud at investment seminars that purport to teach investors trading strategies that will allow them quickly and easily to make money trading securities. Some trading seminar promoters may use misleading or untrue statements to lull investors into purchasing expensive products such as trading software or classes.

Investor Alert for Seniors

Older Americans are often targets of investment fraud. Always check whether the person offering to sell you an investment is registered and licensed, even if you know him or her personally. Unregistered/unlicensed persons who sell securities perpetrate many of the securities frauds that target older investors.

Annuities Hard Sell

Annuities have become a part of the retirement and investment plans of many Americans. Unfortunately, many investors were misled by highly compensated insurance agents and bought variable annuities for wrong reasons, including "guaranteed annual returns", "up-front cash bonus", among others.

Notes with Principal Protection

Structured notes with principal protection contain risks that may surprise many investors and can have payout structures that are difficult to understand. Investors must realize that chasing a higher yield by investing in a structured product could mean winding up with an expensive, risky, complex and illiquid investment.

Private Placement Investing

Each year, companies raise billions of dollars selling securities in non-public offerings that are exempt from registration under the federal securities laws. These private placements can be a key source of capital for American businesses. But investing in private placements is risky and can tie up your money for a long time. You can also lose some or all of your money.

Stock Promotion Alert

Fraudsters who conduct stock promotions are often paid promoters or company insiders who stand to gain by selling their shares after creating a buying frenzy and pumping up the stock price.  The promoters or insiders make profits for themselves while creating losses for unsuspecting investors.

High-Yield CD / Indexed Annuity

Advertisements touting high-yield CD might actually be a lure to trick investors into buying costly investments. Many such ads are ploys in which the CD is used as bait to try to sell you a high-commission product, such as a fixed or equity-indexed annuity, a complex insurance investment that is not FDIC-insured and not subject to federal securities laws.

Investing in Non-Traded REIT

A real estate investment trust (REIT) is a company that owns and may also operates its income-producing real estate or real estate-related assets. Many private REITs (non-traded), even they are registered with the SEC, pose risks different than an investment in a publicly traded REIT.

Social Media and Investing

While social media can provide many benefits for investors, it also presents opportunities for fraudsters. Social media, and the Internet generally, offer a number of attributes criminals may find attractive. Social media lets fraudsters contact many different people at a relatively low cost. As a result, investors need to use caution when using social media and considering an investment.

Identity Theft Scams

Cyber-crime often uses the hook that can look like from the sources you know and trust. It can even come in the form of a seemingly authentic email from a financial institution or even a government agency. These "Phishing" attacks use spam email or a fake website to lure you into revealing your confidential information such as account information, passwords or PINs, and Social Security number.
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False Advertising Red Flags

Under the federal securities laws, a company may not offer or sell securities unless the offering has been registered with the SEC or an exemption to registration is available. If you are presented with an advertised opportunity to invest in an unregistered offering, you should be on the lookout for common signs of potential fraud when you are thinking about investing.

Mutual Fund Fees and Classes

Different types of classes may exist for mutual funds, so do your homework and comparison shop. Even no-load funds continue to have regular fund operating costs that are not necessarily associated with the purchase or sale of fund shares, such as investment advisory fees, marketing and distribution expenses, brokerage fees, and custodial, transfer agency, legal, and accountants’ fees.

Closed-End Funds

A closed-end fund' distribution rate is not the same thing as its return. Closed-end funds are often associated with additional problems involving higher operating expense, initial purchase (IPO) sales charges, less liquidity, higher volatility, unpredictable market prices due to premium and discount, leverage risk and margin interest cost, and additional tax implications.

Securities-Backed Line of Credit

Firms market SBLOCs as a type of financing and liquidity strategy that can unlock the value of your investment portfolio. It seems like an attractive way to access extra capital, but market volatility can magnify your potential losses, placing your financial future at greater risk. Remember to exercise caution and consider the risks before pledging your securities as collateral.

Self-Directed IRA and Risk of Fraud

A self-directed IRA is an IRA held by a trustee or custodian that permits investment in a broader set of assets than is permitted by most IRA custodians. Most IRA custodians are banks and broker-dealers that limit the holdings in IRA accounts to firm-approved stocks, bonds, mutual funds and CDs.

401k and IRA Rollover Alert

The decision to move your 401k plan asset or stay put is an important one. You can usually keep some or all your savings in your former employer's plan. You can transfer assets to your new employer's plan, if allowed. You can roll over your plan assets into an IRA. Or you can cash out your balance. Take the time to assess your options.

Investor Alert for Seniors

Older Americans are often targets of investment fraud. Always check whether the person offering to sell you an investment is registered and licensed, even if you know him or her personally. Unregistered/unlicensed persons who sell securities perpetrate many of the securities frauds that target older investors.

"Life Settlement" Transactions

In a “life settlement” transaction, a life insurance policy owner sells his or her policy to an investor in exchange for a lump sum payment. Under certain situations, the investor may not receive the death benefit. Individual investors should seek guidance from an unbiased financial professional who will not receive a commission or any other benefit from the transaction.

Hedge Fund Costs and Risks

Hedge funds have been offered as unregistered securities that, because of the risks they posed, were only available to sophisticated investors. There have been a number of cases where investors suffered substantial losses due to fraudulent activity at hedge funds. Expenses in hedge funds are also significantly higher than most mutual funds.

Pre-IPO Offerings

Offerings of securities must either be registered with the SEC or meet an exemption under the federal securities laws, otherwise the offering is not legal. "Pre-IPO" speculation involves buying unregistered shares in a private company before the initial public offering of securities. It can range from risky deals to outright frauds.