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What You Can Do About Financial Fraud

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Monday, November 4, 2019


The sad truth is that there are criminals in this world who are constantly on the lookout for new ways to scam people out of their money. And in a digital online community, it gets easier and easier for said criminals to misrepresent their intentions behind the mask of internet anonymity.

Seniors are a common target for financial scams, and with 10,000 Americans turning 65 every day, this is a target-rich area for any would-be thief. The pursuit of seniors’ “nest eggs” is one of the fastest-growing consumer fraud issues today. It is estimated that $37 billion are stolen from seniors and the elderly every year. The Federal Trade Commission estimates that 25 million Americans are victims of consumer fraud each year.

The best defense against investment fraud is an educated and skeptical consumer. That is why due diligence is necessary. Here are some things you can do to help protect yourself from fraud:

Do your homework

Verify that the investment offering is registered with your state securities regulator and/or the Securities and Exchange Commission. Say no to any salesperson that pressures you to make an immediate decision. If he or she doesn’t have the time to explain the investment to your regular investment professional or other parties, or if they ask, “Can’t you make your own investment decisions,” say NO! You have the right and responsibility to check out the salesperson, firm, and the investment opportunity itself. Call the DFI’s Securities Division at 360-902-8760 or 1-877-RING DFI (1-877-746-4334) to check the license of the investment professional and registration of the investment product.

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. And never judge a salesperson’s trustworthiness based on how they look or sound. The only thing you should trust is that they are professionals and can provide verifiable data on the investment. No amount of salesmanship can make a bad investment into a good one. 

Maintain a file with all correspondence and notes from conversations. Print a hard copy of all
online 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 can be considered as hearsay.

Be tough

Don’t be afraid to be confrontational. And don’t let yourself get overwhelmed by a seemingly superior knowledge of finances. One of the favorite tactics used by scammers is to prey on the uneducated and act as they know more than you, thereby pushing the victim into insecurity.

Ask tough questions. 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? 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? Can they provide complete disclosure of every last penny required to own this investment?

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.

Don’t be afraid to be rude

One of the favorite methods to extract money from a would-be target is to get them on the phone and exploit their good manners. If you’re not interested, you have absolutely no obligation to a stranger who cold calls you and asks for your money. Your best defense in this situation is to not be afraid to offend. Just say you’re not interested — and hang up the phone.




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. Member FINRA & SIPC.








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Founded in 1976, David Lerner Associates is a privately-held broker/dealer with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Lawrenceville, NJ; and White Plains, NY. For more information contact David Lerner Associates Call 800-367-3000 Visit our website: www.davidlerner.com

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