Investment fraud is a significant problem in America. The FTC (Federal Trade Commission) estimates that millions of Americans are victims of consumer fraud each year. Older investors are a favorite target of fraudsters who focus on investments. The pursuit of seniors’ “nest eggs” is one of the fastest-growing consumer fraud issues today.
While estimates vary as to the numbers, it’s still a conservative guess that about 10 percent of investors will be victimized by investment fraud at some point in their lives.
Many baby boomers are entering retirement with significant assets and can be vulnerable to fraud at key ‘wealth events’, such as the sale of a house, an inheritance, or an IRA rollover. Protecting these assets is essential to ensure the financial well-being and retirement security of millions of Americans.
The best defense against investment fraud is an educated and skeptical consumer. That is why due diligence is necessary.
Here are some things that you can do to help protect yourself from fraud.
- Verify that the investment offering is registered with your state securities regulator and/or the Securities and Exchange Commission.
- Beware if the only written material you receive is a glossy brochure. Demand a prospectus and/or other legal disclosure documents as required by law.
- Review past issues of investor reporting for completeness, accuracy, and disclosure.
- Determine how the funds solicited for investment will be used? Will the funds be segregated from other accounts available to the business?
- What is the basis for the purchase price of the investment? Does it represent fair value?
- What does it cost to own this investment? Are there any annual fees, holding charges, custodial fees, or hidden charges? Let the promoter know you want a complete disclosure of every penny required to own this investment.
- What is the liquidity of the investment? Can you sell it whenever you want to? Is there a ready market of buyers? What are the expected transaction costs when selling? What are the restrictions on selling?
- Maintain a file with all correspondence and notes from conversations. Print a hard copy of all on-line solicitations noting the internet address (URL), time and date. Get all claims, guarantees, and terms of the deal in writing. If it’s not in writing, then it’s not real.
- If you’re not confident or lack experience in a particular investment then consult with a third party such as your attorney, or registered investment advisor for a second opinion before investing.
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.
Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable-- we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances.
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