How to Avoid Financial Fraud
Editor’s note: As we get older, having enough money becomes even more crucial for a number of reasons: to have a comfortable retirement and to be able to pay for health expenses and long-term care. Financial fraudsters prey on just those concerns, and trusting the wrong person can be catastrophic. Here, the Securities and Exchange Commission (SEC) offers some tips on how to avoid financial disaster:
Seniors are particularly vulnerable to tactics of scam artists who are “nice” or attempt to develop a false bond of friendship. Scam artists prey on seniors who are polite to others and have difficulty saying “no” or feel indebted to someone who has provided unsolicited investment advice.
WHAT CAN I DO TO AVOID BEING SCAMMED?
Ask questions and check out the answers. Fraudsters rely on the fact that many people simply don’t bother to investigate before they invest. It’s not enough to ask a promoter for more information or for references—fraudsters have no incentive to set you straight. Savvy investors take the time to do their own independent research and talk to friends and family first before investing. Make sure you understand the investment, the risk attached, and the company’s history. And remember, if the product sounds too good to be true, it is!
Research the company before you invest. You’ll want to fully understand the company’s business and its products or services before investing. Before buying any stock, check out the company’s financial statements by using the SEC’s EDGAR database at www.sec.gov/edgar.shtml or contact your state securities regulator. Remember that unsolicited emails, message board postings, and company news releases should never be used as the sole basis for your investment decisions.
Know the salesperson. Spend some time checking out the person touting the investment before you invest—even if you already know the person socially. Always find out whether the securities salespeople who contact you are licensed to sell securities in your state and whether they or their firms have had any troubles with regulators or other investors. You can check out the disciplinary history of brokers and advisers quickly—and for free—using the online databases of the SEC and the Financial Industry Regulatory Authority (FINRA). Your state securities regulator may have additional information.
Never judge a person’s integrity by how he or she sounds. Successful con artists know how to sound professional. They can make even the flimsiest deal sound like a “sure thing.” Con artists know that the appearance of professionalism combined with polite manners or overtures of friendship may lead many older investors to accept their advice.