Brokers Gone Wild (Part 2)

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On November 26, 2008, in Investor Protection, Investors at Risk, SEC, Scams, Securities Industry (general), by Investor's Watchblog

The central feature of the scam that will destroy your nest egg? Safety.
You will learn about it from someone you trust. It will promise guaranteed returns. You will see it work with your own eyes. And, when all the smoke has cleared, all of your money will be gone.
You’ve likely read stories about people losing [...]

The central feature of the scam that will destroy your nest egg? Safety.

You will learn about it from someone you trust. It will promise guaranteed returns. You will see it work with your own eyes. And, when all the smoke has cleared, all of your money will be gone.

You’ve likely read stories about people losing their life savings to an investment scam and thought, How could anyone fall for something like that? You’ve thought, I’m too smart for that, not realizing that, by saying that, you have identified yourself as an easy mark. In our next post we’ll discuss in more detail some of the sales techniques that financial criminals often use. For today, please just understand that avoiding a nest-egg-busting scam is not about remembering a list of do’s and don’ts. It is not at all like stealing yourself to survive a high pressure time-share pitch. The secret is understanding yourself in a way that most people cannot. More on that next time.

In theses days of global economic recession, expect the most dangerous financial scams to have three features. First, they will offer a rate of return only a few points higher than what you could earn on more conventional investments. In my days at the U.S. Securities and Exchange Commission and since, I’ve seen scams offering double digit returns per month. Smart scam artists will know that promising something more within the realm of reason will likely yield a greater number of prospective buyers.

Second, expect some sort of “guarantee” on your investment. Whether it is an insurance policy or a personal guarantee signed by the investment promoter, there will be a guarantee.

Finally, the promoter will likely ask you to sign something promising to keep the details of the “investment” confidential. It will not look suspicious. It will likely look something like a standard non-disclosure agreement (NDA) that businesses frequently sign when sharing confidential information.

If you see an investment with any of those features, beware. More importantly, if you can see your reflection in a mirror, realize that, despite what you believe, you are highly susceptible to losing your nest egg. Protect it with private investor protection services, or risk losing it all.