investing

Investment scams on the rise among boomers

Oftentimes, con artists will befriend the leader of a group or organization and they may pay off a couple of "initial investors" within the group. These initial investors will often help to promote the scam to other friends in the group or organization.

"People put their defenses down," Schock says. "If it's good enough for my friends, then it's good enough for me."

Con artists also are targeting seniors in more informal settings such as weekly lunch groups or morning coffee groups, Struck says.

"Just as often as a formal organization, it's a gathering of friends," Struck says.

Fraud at free-lunch seminars

Fraud at free-lunch or free-dinner seminars targeting seniors is on the rise, with state securities regulators reporting three times as many fraud cases involving these events in 2010, compared with 2009.

Many free-lunch and free-dinner seminars are marketing tools used by legitimate investment professionals selling legitimate investments. But some of these events are outright investment scams run by con artists, Webster says.

"A lot of fraud can start off in a free-lunch seminar. It can be a first point of contact," Webster says.

The best way to guard against fraud is to check out the credentials of the person running the free-lunch or free-dinner seminar.

"A lot of folks offering seminars aren't licensed to sell or give advice regarding securities," Kitzi says. "Before you invest a single dollar with any investment, seniors, anyone, should call their state securities regulator and ask about the person and the product."

Warning signs of a con

A telltale sign of an investment scam is a high-pressure sales pitch urging investors to act immediately. Don't be fooled.

"'You have to act today. It won't be here tomorrow.' That's the close for almost every scam," the SEC's Schock says. "A legitimate investment will be there tomorrow, next week and next month."

Another sign of investment fraud is the promise of too-good-to-be true returns.

"There's no such thing as a risk-free investment. Any investment will carry a degree of risk," Webster says. "What you'll see in fraudulent pitches is a promise of risk-free investments or low-risk, high-return investments. Those should be warning signs."

Do due diligence before investing

Check to see if an investment professional is licensed in your state. Contact information for state securities regulators in the 50 states and Washington, D.C., is available on the NASAA website.

Your state securities regulator can tell you whether an investment is registered and if a broker or a broker's firm has a disciplinary history.

You also can check the disciplinary history of brokers and investment advisers by using online databases at SEC.gov and the Financial Industry Regulatory Authority, or FINRA, website.

The Investment Adviser Public Disclosure website, AdviserInfo.sec.gov, has a database that includes the registration statements filed by investment advisers registered with the SEC.

Before buying stock, check out the company's financial statements by using the SEC's EDGAR database, which stands for electronic data gathering and retrieval and can be found on the SEC's website at sec.gov.

 

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