More On Legal & Compliancefrom The Advisor's Professional Library
- Differences Between State and SEC Regulation of Investment Advisors States may impose licensing or registration requirements on IARs doing business in their jurisdiction, even if the IAR works for an SEC-registered firm. States may investigate and prosecute fraud by any IAR in their jurisdiction, even if the individual works for an SEC-registered firm.
- Preventing and Dealing with Client Complaints Although the SEC has not provided specific guidance on how client complaints should be handled, a firms policies and procedures should provide clear direction how to do so, as neglecting complaints can exacerbate a bad situation.
The Financial Industry Regulatory Authority warned investors Wednesday to be wary of promotions touting certificates of deposit that promise interest rates that are substantially higher than current averages, and provided investors with a list of “red flags” that indicate a CD offer may be fraudulent.
In an investors alert, High-Yield CDs: Red Flags That Signal a Scam, FINRA notes an instance of suspected email fraud, in which the pitch appeared to come from a large U.S. bank that supposedly was promoting a CD offered by an international banking partner.
At a time when most CDs at U.S. banks and credit unions were offering just over 1% for a comparable term, this pitch offered a CD with a 15% yield, and contained instructions on how to wire funds, FINRA said.
“Savers continue to face near-historic low yields on traditional bank products,” said Gerri Walsh, FINRA’s senior vice president for Investor Education. “Fraudsters attempt to take advantage of investor desire for higher yields by luring them into potentially fraudulent CDs that promise both safety and double-digit returns.”
The alert provides a list of red flags that would likely indicate a CD offer may be fraudulent, including:
--interest rates that are significantly higher than average;
--emails with addresses that are not originated and sent by the financial institution that is cited in the promotion;
--emails that contain misspellings or grammatical errors;
--promotions that claim to be from a U.S. financial institution that has aligned with an international bank;
--promotions that claim to be for a “limited time only”; and
--promotions that claim to be directed at “best customers” and that require extremely high minimum investments (for example, $100,000).
The alert advises investors who believe they have been a victim of a CD scam to contact their financial institution immediately to report a loss or theft of funds through an electronic funds transfer.
Check out IRS’ Top 12 Tax Scams: 2014’s Dirty Dozen on ThinkAdvisor.