National Investment Fraud Lawyers

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Types of Investment Fraud

Investments may help you achieve your long-term financial goals. Investing your money opens the possibility of a benefit in the future, called a return. Most people have heard of stocks and bonds, but these are just two of the many different ways you can invest your money.

Most first-time investors work with a financial adviser or stockbroker to understand what types of investments are suitable for their objectives, risk tolerance level, and financial needs. Understanding which investments are available will help you choose the correct ones for your account and develop a healthy, diversified portfolio.


When you invest in a stock, you share ownership with a corporation. The success or failure of the company determines whether you lose or make money on a stock. Other factors also affect your stock investment, such as what type of stock you own and the stock market’s performance as a whole. There are two kinds of stock: common and preferred. Publicly traded companies issue common stock, where stockholders’ share prices rise and fall with the company. Some companies issue preferred stock, which exposes clients to less risk of loss but also less potential for returns.


Bonds are loans that investors make to a government, federal agency, or corporation in exchange for interest payments over time, plus repayment of the principle. The investor agrees to loan an organization money in exchange for compensation in the form of interest. By the bonds’ maturity date, the organization must pay the principle amount plus interest. Bonds may be short-, medium-, or long-term, depending on the maturity date. There are many types of bonds, but the most common are:

  • S. Treasury securities
  • S. savings bonds
  • Agency securities
  • Mortgage-backed securities
  • Municipal bonds
  • Corporate bonds
  • International market bonds

A securities broker or financial adviser can help you understand the key characteristics of each type of bond and which may be suitable for your investment. Bonds are an important part of most diversified portfolios.

Investment Funds

Investment funds use money from many investors to invest according to a strategy. Investment funds brokerage firms offer to the public include mutual funds, closed-ends funds, exchange-traded funds, and unit investment trusts. These publicly offered funds must register with the Securities and Exchange Commission. Private investment funds, or hedge funds, do not have to register and thus aren’t subject to the same regulations. Investment funds offer diversification, but they also involve risk (as does any securities investment).

Structured Products

Generally, a structured product is a pre-packaged investment that incorporates indices, bundled securities, foreign currencies, or other derivatives. Derivatives are investments that take their value based on how an underlying entity performs in the market. They may offer investors a “principal guarantee” – meaning they will protect your principal on the condition that you hold the securities until maturity.

There are different types of structured products, and they have many risks for investors. Because they’re not considered special assets, they are not protected if the issuer becomes insolvent. If you are considering investing in a structured product, it’s important that your broker provide you with comprehensive information on the issuer’s credit and financial situation. Your financial advisor should also keep you well informed of the risks around liquidity, market risks, and currency risks for any structured product investment.

Investment Fraud

Even if you do your homework, it is still possible to fall prey to fraudulent investment practices. Dishonest investment schemes we have seen include:

Your investment broker should be an ally in handling your portfolio, but sometimes they fail to uphold their end of the bargain and end up harming your long-term financial potential.

Contact an Investment Fraud Attorney

If you feel your broker was careless in advising you regarding any type of investment, an experienced investment lawyer can help you determine if you’re entitled to damages resulting from those losses, including principal protected notes and reverse convertible notes. At Erez Law, we hold stockbrokers and their firms to the high standards their profession demands. Speak with us to determine if you believe a financial advisor manipulated your investments.