How to Protect Yourself Against Investment Fraud: 5 Questions

There are more - and more sophisticated - investment scams operating in the financial markets today than ever before. While some of the most effective are still the "oldest tricks in the books" - like the more than 100 year-old Ponzi Scheme, new schemes are launched every day. Indeed, the digital age seems made for fraud, with its lightning quick speed and reams of impenetrable data.

What can you do, oh unsophisticated investor, to protect yourself against the attacks and traps of some of history's most dastardly fraudsters? For a start you can ask yourself the following 5 questions about investment fraud - and answer them as honestly as possible. Remember, when you're trying to protect yourself from the deception, the last thing you want to do is self-deceive!

How hungry are you for big gains?

Believe it or not, your appetite for big gains is a strong indicator of your vulnerability to investment fraud. Those who not only seek big gains but, even more tellingly, believe they are possible without big risks, are among the most susceptible to fraud. 

Do you put your faith in people or in products?

If you're the kind of person who thinks that because your broker seems like a "really good guy" he is making really good investments for you, you should be careful. As a securities litigation firm, we have seems dozens of "good guys and gals" rip off dozens of trusting investors, using that very trust to deceive them.

How well do you understand financial products?

In a nutshell, if you think you do, you probably don't. In terms of fraud, you're actually safer believing you do not understand today's financial products at all than arrogantly assuming you do. Besides, if you really understood them, you'd be bulletproof. As the saying goes, a little knowledge is a dangerous thing.

Have you run a background check on your financial advisor?

Surprisingly few investors know that they can use a free resource provided by the financial industry itself to do a professional background check on their broker. BrokerCheck, run by FINRA (the Financial Industry Regulatory Authority), provides not only a work history of every registered broker in the industry, but also a history of customer complaints, disputes, and terminations.

Do you read your statements?

Few investors even open their mail from their brokerage companies, let alone look closely at their statements. If they look at their statements, they look at the balance alone. This is not enough. Investors need to educate themselves in order to know when their statements contain the kind of red-flags - risky products, overconcentration, etc. - that could lead to huge losses down the road.

PA & NJ Investment Fraud Law Firm

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If you or someone you know has been the victim of investment fraud or broker misconduct, please contact our team of securities attorneys immediately for a free consultation toll-free at 215 462 3330 or by using our online contact form.