Investor's Watchdog.com: Stock, finance and investment protection for investors

Six years in the Enforcement Division of the U.S. Securities and Exchange Commission, and another twelve years representing individual investors have given me what few others have - a crystal ball in which I can see the future of financial scams.  Let me share with you what I see in that crystal ball for the coming two to three years.

Baby boomers and senior citizens will see many cleverly-disguised scams pitching investment in certificates of deposit.  Why CD’s?  The current financial panic has made people afraid of the stock market.  Scams involving stock will therefore fall out of favor.  People are craving safety.  CD’s have a fairly good reputation in that regard.  Scam artists know this and, as they always do, they will take advantage of it. 

Expect to see offers for CD’s paying rates three to five percentage points higher than the best rate you can get from your local bank.  Why three to five percent?  Smart scam artists understand that truly outrageous rates will raise people’s suspicion, and they therefore promise rates more in line with legitimate investments.  They do not intend to pay you any “profit” whatsoever - anything you receive will be either a return of your principal or the principal invested by a later investor.  The scam artist is therefore free to pick a “return” out of thin air.  The smart ones will use that freedom to pick a number that is at least halfway believable.

Given people’s uncertainty about the health of the nation’s banking system, expect to see claims that the CD’s are issued by an institution that is covered by the government financial rescue plan.  Also expect to see claims that the CD’s are insured by an insurance company that is covered by the rescue plan. The scam artists may even claim that the CD’s are insured by AIG or a subsidiary, because the government’s bailout of that company has been in the news. 

Are some CD’s legitimate?  Sure.  That is why the scam artists will choose them.  How, then, to find out whether the CD you are considering is legitimate or only a cleverly-disguised scam?  Investor’s Watchdog has been applying its SEC experience to protecting investors from scams for more than one year now.  In that time, it has saved its customers millions that scam artists would otherwise have spent on expensive cars and vacations. 

Before you entrust any of your nest egg to the promoter of an unregistered investment (like CD’s), to a stockbroker or investment adviser, ask Investor’s Watchdog to investigate.  Is your retirement worth that extra step?  To answer that question, think of the years it took you to accumulate that retirement fund, of the work you put in to earn it, and the consequences to you and those you love of making a mistake.