Part 1 of 2
By Sandy Hunter
Administrative/Marketing Assistant

As we have begun the uphill climb from the market slump it has created the perfect breeding ground for investment scammers to run rampant. With tensions high and people feeling desperate to make up their losses investors, if not educated and on the defense, are sitting ducks for con men on the hunt for easy prey. Following you will find information on how to protect yourself and your investments from would be thieves.

The Psychology of a Scam

“If it’s too good to be true, it probably is” – which is true but one of the struggles is knowing the difference between good and too good. In this economy it is even harder, which is exactly what investment fraudsters are counting on. Their smoke and mirrors can make any investment seem like a sure fire deal. Scammers look for your Achilles heel by asking seemingly harmless questions. They might ask about your family, health, hobbies, past employers, political views, anything that might seem like just small talk or basic information. They will use their new found personal information as ammunition against you through one of these popular persuasion tactics:

The “Phantom Riches” Tactic-dangling the promise of wealth. Enticing you with something you want but can’t have. “These gas wells are guaranteed to produce $6,800 a month in income.:

The “Source Credibility” Tactic-trying to build credibility by claiming to be with a reputable firm or to have a special credential or experience. “Believe me, as Vice President of XYZ firm, I would never sell an investment that doesn’t produce.”

The “Social Consensus” Tactic-leading you to believe that other savvy investor have already invested. “This is how ____ got his start.“

The “Reciprocity” Tactic- offering to do a small favor for you in return for a big favor. “I’ll give you a break on my commission if you buy now, half off!”

The “Scarcity” Tactic-creating a false sense of urgency by claiming limited supply. “There are only two units left, so I’d sign today if I were you.”

These are all tactics used by genuine companies, which makes it even harder to distinguish the difference. These tips can help you tell the difference.

1. End the conversation. It is not impolite of you to tell them “no thank you I am not interested” and then hang up. It is impolite of them to try to steal your money so you are under no obligation to listen to what they have to say! If you struggle with being direct, tell them you don’t make financial decisions without consulting your _______ first. Let your spouse, lawyers, accountant, financial advisor, whomever be your escape goat. 

2. Take control and ask the questions. One blanket red flag is if they are not licensed and registered. Ask if they and their firm is registered with FINRA? Securities and Exchange Commission? If so, which one(s)? Then do your homework and verify that they are by using: FINRA Broker Check or call 800-289-9999 for Brokers.  Use the SEC’s Investment Adviser Public Disclosure Website which is:   http://www.adviserinfo.sec.gov/IAPD/Content/IapdMain/iapd_SiteMap.aspx

3. Research an investment. Ask if it is registered with the SEC or with your states securities regulator/ Then use the SEC’s EDGAR database of company filings at to confirm it really is: http://www.sec.gov/edgar.shtml

4. Always get a second option. If they tell you to  not tell anyone else be extremely skeptical. Even if they are registered it is a good idea to talk to other people and see what they know before making a decision.

One way to help safeguard yourself is to reduce the amount of telemarketing as much as possible. One easy step is to take your number off telemarketing and junk mail lists.

Telemarketing calls-  www.donotcall.gov or call toll free (888)382-1222

Direct Mail and email offers-  www.dmachoice.com

Credit Card Offers- www.optoutprescreen.com

Online Cookie Collecting- http://www.networkadvertising.org/

Most legitimate firms will honor your request. So if you receive solicitation after taking these steps, be even more skeptical.

If you believe you have been scammed you can file complaint with FINRA at:

FINRA Complaints and Tips
9509 Key West Avenue
Rockville, MD 20850

I also found this great tool to help you decide if an investment is “too good!” Visit this website: http://apps.finra.org/meters/1/scammeter.aspx

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