Identifying Risk Factors that Make Investors Susceptible to Fraud

The Financial Industry Regulatory Authority (FINRA) issued a new Investor Alert called Avoiding Investment Scams which described risk factors that make investors susceptible to investment fraud and provides tips to avoid being scammed.

FINRA has identified the 5 following risk factors for investors falling prey to fraudsters:

  1. Owning high-risk investments.
    2. Relying on friends, family, co-workers for advice.
    3. Being open to new investment information.
    4. Failing to check the background of an investment or investment professional.
    5. Inability to spot persuasion tactics used by fraudsters.

FINRA urges investors to ask questions about investments and investment professionals by doing the following:

  1. Perform a Background Search on the Investment Professional: Ask if the investment professional is licensed to sell you the investment and confirm which regulator issued their license. Additionally, ask if and when their license has ever been revoked or suspended. A legitimate securities salesperson must be properly licensed, and his or her firm must be registered with FINRA, the SEC or a state securities regulator—depending on the type of business the firm conducts. An insurance agent must be licensed by the state insurance commissioner where he or she does business. To verify the investment professional’s response use FINRA BrockerCheck, contact National Association of Insurance Commissioners or contact North American Securities Administrators Association.
  2. Check Out Investments: Ask whether the investment is registered and, if so, with which regulator. Usually companies register their securities before they can sell shares to the public. You can find out whether a product is registered with the SEC by using the EDGAR database. Additionally, you can also use FINRA’s ScamMeter to determine whether an investment might be a scam.

If you and have suffered investment losses, please contact the Hanley Law to explore your legal options. The Hanley Law is dedicated to helping investors who have been victims of securities fraud. If you have lost money as a result of securities fraud, you may be able to recover your financial losses. Contact us today toll free at (239) 649-0050 for a free initial consultation.

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