The Federal Trade Commission reports that U.S. citizens lost more than $3.8 billion to investment fraud in one recent year. After working so hard for your money, the last thing you want is to lose it to fraud. Understanding what constitutes investment fraud, the tactics brokers employ, and how to spot red flags of insurance fraud is crucial to protecting yourself and your finances.
What Is Investment Fraud?
Investment fraud is the purposeful deception or misleading of an investor for the perpetrator’s financial gain.
Common Investment Fraud Tactics
Unscrupulous brokers have various tactics for pressuring their targets into investing with them. FINRA points out these common tactics:
- Enticing someone with the prospect of future wealth
- Leading a person to believe others have already invested in what they’re offering
- Offering a favor in exchange for investing
- Claiming the supply is limited to create a false sense of urgency for the specific investment
Red Flags of Investment Fraud Tactics
Here are some tips for recognizing red flags in potential investments:
- If an opportunity sounds too good to be true, it probably is. You should steer clear of anyone claiming unusually high or quick returns. At best, this could be a dangerously risky move for your investment strategy. At worst, it could be outright theft.
- There is no such thing as a guaranteed return. Brokers might promise a high return on the products they’re trying to sell. However, there is always some level of risk in every investment.
- Brokers know how to appear trustworthy or likable to their targets. You should confirm someone’s qualifications before investing with them – and with as many reliable third parties as possible.
- Be wary of appeals to your fear of missing out. Fraudsters will often claim that everyone who matters is investing with them, hoping that their targets’ desire to be a part of the in-group will make them less suspicious.
Strategies to Protect Yourself from Investment Fraud
Here’s how to avoid investment fraud and protect yourself from being the target of an unscrupulous broker, advisor, or salesperson:
- Conduct research – You should never base your investment decision solely on the information provided in a company news release, message board post, or unsolicited email. Research the company and its services or products through reputable sources.
- Ask questions – Fraudsters hope their targets won’t investigate before handing over their money. Don’t fall prey to this. Ask them questions about the specifics, and independently search for information to confirm the legitimacy of the business and investment.
- Carefully navigate unsolicited offers – If you receive an unsolicited sales pitch, proceed with caution. You should use independent sources to find up-to-date financial information before moving forward with a potential investment.
- Look up the broker – Although you might know a broker socially, researching them before investing is still a good idea. You should verify their licensing and whether they have ever gotten into legal trouble with other investors or regulators.
Contact an Investment Fraud Lawyer Today
Erez Law, PLLC is a nationally recognized law firm with a proven track record of recovering substantial sums for investors like you. If you think you may have been the victim of misconduct by a broker, advisor, or another investment professional, we want to hear from you. Call or contact us online today for a free case review with an investment fraud lawyer.
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