Top 5 Ways to Identify a Financial Scam

Top 5 Ways to Identify a Financial Scam

Financial scam artists are some of the most sophisticated criminals around. However, if you ask many law enforcement officials and regulatory agencies, investors often play right into their hands by not being cautious enough when vetting a new investment opportunity or by getting carried away into believing a “too good to be true scheme” that involves “no risk” and “huge returns.” There’s a reason why the Ponzi Scheme, invented around the turn of the 20th century, is still doing big business one hundred years later.

Investors Are Their Own First (and Often Best) Line of Defense Against Financial Fraud

Below are five ways to identify a financial fraud in the making and to stop it from hitting you and your investment account.

Check credentials.

Scammers will often tout their degrees, certifications, and experience to unsuspecting investors. The operative phrase here should be “distrust and verify.” Legitimate financial professionals must register with FINRA, the SEC, or a state securities regulator. You can use Google or a more focused tool like FINRA BrokerCheck to make sure whoever comes calling is who they say they are.

Be skeptical.

Those who promise amazing returns with no risk are the ones who end up running off with your life-savings. They offer what fraud detectors call “phantom riches” — promises they never fulfill. No registered salesperson can make these kinds of promises, legally.

Not everyone is “in” on the deal.

Fraudsters love to play on people’s FOMO (Fear of Missing Out). If you hear someone saying “everyone is on this deal and you shouldn’t miss out,” run a mile in the other direction. Affinity frauds owe their effectiveness to this approach, since they make investors feel like their peer group are all doing it and so should they.

Don’t be rushed.

Let those limited time offers pass you by. Investment opportunities are everywhere; there’s no reason to ever be rushed into a deal you’re not comfortable with. Take your time. Do you due diligence. Then decide.

Knowledge is power.

The best defense against investment fraud is sophistication. Educate yourself about the latest investment opportunities — and the latest frauds. Become an informed consumer. Ask questions. Get answers.

Pennsylvania & New Jersey Stock Broker Misconduct Lawyers

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