Tag: Stock Fraud

SEC warns of “Red Flags” when Making Investment Decisions

The Securities and Exchange Commission recently issued an Investor Alert to help older Americans identify signs that what is offered as an investment may actually be a fraud. The SEC’s Office of Investor Education and Advocacy warned that older Americans are often targets of investment fraud, and advised that there are five (5) “red flags” seniors should look out for when making investment decisions:

  1. Promises of High Returns with Little or No Risk. A classic warning sign of investment fraud is the promise of a high rate of return, with little or no risk. The SEC advised that every investment carries some degree of risk, and the potential for greater returns generally comes with greater risk. The SEC warns investors to avoid putting money into “can’t miss” investment opportunities or those promising “guaranteed returns.”
  2. Unregistered Persons. The SEC advises investors to check whether the person offering to sell you an investment is registered or licensed, even if you know him or her personally. Unregisterd/unlicensed persons who sell securities commit many of the securities frauds that target older investors. It is free to research the background of the individuals and firms selling you investments, including their registration/license status and disciplinary history. There are several way you can research the individuals selling you investments:
  • Search the SEC’s Investment Adviser Public Disclosure (IAPD) online database.
    • Search the Financial Industry Regulatory Authority (FINRA)’s BrokerCheck online database.
    • Contact your state securities regulator.
    • Contact the SEC’s Office of Investor Education and Advocacy directly at (800) 732-0330 to help research the person and firm selling you the investment.
  1. Red Flags in the Financial Professional’s Background. The SEC advises investors to be aware of potential red flags in their advisor’s or broker’s background, including: (1) employment at firms that have been expelled from the securities industry; (2) personal bankruptcy; (3) termination; (4) being subject to internal review by an employer; (5) a high number of customer complaints; (6) failed industry qualification examinations; (7) federal tax liens; and (8) repeatedly moving firms. Investors can search the records of the SEC, FINRA, and state securities regulators to identify red flags.
  2. Pressure to Buy Quickly. The SEC warns that if an investment professional attempts to pressures you into making an investment decision quickly, you should walk away as you could potentially be at risk for becoming a victim of investment fraud. The SEC cautions investors that no reputable investment professional should push you to make an immediate decision about an investment, or tell you that you’ve got to “act now.”
  3. Free Meals. The SEC further warns investors to be cautious of “free lunch” seminars. The ultimate goal of investment professionals in offering free meal investment seminars is typically to attract new clients and to sell investment products. The SEC advises investors that even if the free meal does not come with a high-pressured sales pitch, investors should expect the “hard sell” during later contacts from the investment advisor or broker selling the investment.

If you have suffered investment losses as a result of your broker’s or brokerage firm’s misconduct, contact the Hanley Law to discuss your legal options. The Hanley Law is dedicated to helping investors nationwide. If you have lost money as a result of your broker’s recommendations, you may be entitled to recover your investment losses. Contact our office toll free at (239) 649-0050 for a complimentary initial consultation.

Common Sales Pitches Used in Investment Scams

The Financial Industry Regulatory Authority (FINRA) issued a new Investor Alert called Avoiding Investment Scams which describes common sales pitches used in investment scams.

Investment fraudsters make their living by making sure the investments they pitch sound good and true. Additionally, fraudsters tailor their pitches to the investor by first gaining background information on the investor and using that information to lure them in. FINRA has identified the following five (5) most common sales pitch tactics:

  1. Phantom Riches Tactic: Entice investors with promises of wealth.
    2. Source Credibility Tactic: Build credibility with claims of having expertise, experience and being from a reputable firm.
    3. Social Consensus Tactic: Lead investors to believe that other savvy investors have already invested.
    4. Reciprocity Tactic: Offer to do a small favor for investor in return for the investor doing a large favor.
    5. Scarcity Tactic: Create a false sense of urgency by claiming limited supply of product.

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.