What can you do to avoid investment fraud?

A little cynicism can go a long way to protect yourself from fraud.

Millions of people become victims of countless forms of fraud each year. Scott Matteson, educator with Michigan State University Extension, says that, “Criminals use the phone, email, postal mail and the internet to lure you into sending money, purchasing products or investments, or giving out personal information.” There are always new ways criminals try to get their hands on your money, so it’s important to know some basic facts about the fraud.

What can you do to avoid investment fraud?

The U. S. Securities and Exchange Commission suggest that consumers should take the following steps to avoid investment fraud:

  1. Ask questions and do your own research. For more about information, see Ask Questions. You can also check out many investments by searching EDGAR.
  2. Know the salesperson. Always find out whether the securities salespeople who contact you are licensed to sell securities in your state and whether they or their firms have had run-ins with regulators or other investors. You can check out the disciplinary history of brokers and advisers for free using the SEC’s and FINRA’s online databases. Your state securities regulator may have additional information.
  3. Be suspicious of unsolicited offers. It could be a “pump and dump” scheme or affinity fraud. As you have heard, if it sounds too good to be true, it probably is.
  4. Protect yourself online. For tips on how to do this, see Protect Your Social Media Accounts.

The Financial Fraud and Fraud Susceptibility in the United States research report prepared by Applied Research & Consulting LLC says that financial fraud solicitations are common, it is difficult for most consumers to identify the classic red flags of fraud and older people face the greatest risk from investment fraud.

Take a moment to use the Financial Industry Regulatory Authority’s  Risk Meter to see if you may be vulnerable to investment fraud. 

If you have a question or concern about an investment, or you think you have been a victim of fraud, please contact the SEC or your state securities regulator to report the fraud and to get assistance. Michigan residents should contact the Department of Insurance and Financial Services.

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