Investment Fraud

Roger's insurance agent told him about a unique investment opportunity - nine-month promissory notes that would yield an 18 percent annual rate of return. The notes were supposed to be secured by automobile titles. Robert agreed to invest $20,000. When it was time for the note to mature, Robert found out that all the money was gone. The agent had used the money for his personal expenses and to pay back other investors. It turned out that the agent was not even registered to sell securities.


Seniors are the primary target of investment con artists. A fast-talking "financial adviser" can swindle an unsuspecting investor out of his or her life savings in a few minutes.

Beware of strangers touting strange deals. Trusting strangers is a mistake anyone can make when it comes to their personal finances. Almost anyone can sound nice or honest on the telephone. Say "no" to any investment professional who presses you to make an immediate decision, giving you no opportunity to check out the salesperson, firm and the investment opportunity itself. Beware of anyone who suggests investing your money into something you don't understand or who urges that you leave everything in his or her hands.

Don't agree to invest with someone just because you share the same religious, cultural or ethnic background. Unfortunately, con artists will use any means to gain a victim's trust. This includes exploiting a common background. Many investors think that because they met a potential advisor in a church or temple, or at a cultural organization, the advisor must be trustworthy and have their best interests in mind. Con artists then use this trust to steal their clients' money. Don't trust someone with your money just because you have a similar background. Ask the same questions and demand the same information that you would from any other advisor.

Do not feel indebted to someone who gives you "unsolicited" financial advice. This person may be trying to gain your trust so he or she can earn fees and commissions by investing your money, sometimes in unsuitable investments. If an investment sounds "too good to be true," it probably is. Some unscrupulous companies try to entice investors with promises of returns as high as 25%, 50% or even 500%. Such claims are usually fraudulent. All investments involve risk. Con artists know that you worry about either outliving your savings or seeing all of your financial resources vanish overnight as the result of a catastrophic event, such as costly hospitalization.

Take your time - don't be rushed into investment decisions . Salespersons who use high-pressure tactics to force an investor into an immediate decision are almost always pitching frauds. They don't want you to think too carefully or find out too much because you may figure out that it's a scam.

  • Ask how, and by whom, the investment advisor is being paid in connection with the services or products being offered.

  • Insist on receiving a prospectus or printed offering materials. READ THEM. Any investment worth making will still be available after you have had time to read about it.
  • Don't believe the age-old lie that you will lose money if you don't get in right away. The truth about such claims almost always turns out to be that you will lose money if you do get in.

  • If you have questions, ask your attorney, accountant and financial adviser to explain the investment.

  • The death or hospitalization of a spouse has many sad consequences - financial fraud shouldn't be one of them. If you find yourself suddenly in charge of your own finances, get the facts before you make any decisions.

Don't throw good money after bad. Beware of "reload" scams. Con artists know the panic people feel after a sudden financial loss. They know that it's the best time to promise to recover the original funds in another "sure thing" scheme. Don't fall for the same (or a similar) scheme twice.

Check out your broker or adviser. Confirm that your broker and financial adviser is registered and in good standing. Contact the Securities Division with the Department of Licensing and Regulatory Affairs, at 1-517-241-6345, to check out your broker or adviser.

Keep tabs on your investments.

  • Be wary when a financial planner says "leave everything to me," or "the plan is too complicated to tell you." Everything should be clear and explainable to you.

  • Monitor the activity on your account. Insist on receiving regular statements.

  • Never be embarrassed or apologetic about asking questions for trading activity that looks excessive or unauthorized. It's your money, not your broker's.

  • Keep all of your records relating to your investments, including notes of conversations you have with brokers, salespeople, financial advisers and the like.

  • Don't compound the mistake of trusting an unscrupulous investment professional by failing to keep an eye on the progress of your investment. Insist on regular written reports. Look for signs of excessive or unauthorized trading of your funds.

Don't be afraid to complain. If your broker or adviser stalls or hesitates when you want all or part of the principal of, or profits from, your investment, ask the reason for the holdup. You may have uncovered a questionable practice.

If you suspect that something is wrong and the explanations you receive are not satisfactory, call the Securities Division with the Department of Licensing and Regulatory Affairs, at 1-517-241-6345 and file a complaint. Don't let embarrassment or fear keep you from reporting investment fraud or abuse.

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