Close Close

Technology > Investment Platforms

Help your clients avoid new investment scams

Your article was successfully shared with the contacts you provided.

Recent stock market volatility and declining yields on CDs and other fixed- income investments are bad news for two reasons: first, they erode client retirement assets and income and second, they unleash more and increasingly devious investment scams.

State securities regulators warn that fraudsters are now preying on investor fears and desire to recapture income. “The recent turmoil in the credit and real estate markets has led some investors to seek higher returns in non-traditional, speculative investments — a proven feeding ground for unscrupulous promoters,” says Ron Thomas, director of the Virginia securities division. For advisors, that means getting involved to help clients avoid such schemes.

Here are some current frauds to warn your clients about:

  • Soaring energy costs have led to an increase in energy-related scams. These may involve existing oil and gas investments or development of new energy-related technologies.
  • The declining housing market has prompted an increase in schemes promising large returns from various real estate-related investments.
  • Unscrupulous individuals may try to use social networking Web sites to lure people to meetings that may promote fraudulent or unsuitable investment products.
  • Auction-rate securities are another area of concern because of their complexity and lack of transparency.

In addition to these scams, Thomas warns that a number of familiar investment traps are still out there, including fraudulent private securities offerings, “pump and dump” schemes, prime bank schemes, and promissory notes.