SCAM ALERT Investment Scams
Mrs. Johnson had never participated in decisions regarding the familyís investments until her husband passed away. Confusing monthly statements, tax documents, and news reports about the condition of the stock market began to plague her. When she received a phone call from a friendly reassuring young man who promised that he "would take care of everything" she jumped at the opportunity to give this burdensome responsibility to an "expert." After spending several hours reviewing her paperwork and admiring the family photos, the financial consultant convinced Mrs. Johnson to invest in a real estate development. He guaranteed her much higher returns than any of her friends were making on their investments, but seemed insulted when she asked for a prospectus and more information about his business. Not wanting to offend this nice man who had spent so much time on her paperwork, she agreed to turn over full control of her retirement assets. The following day a courier arrived to pick up the large check she had agreed to give to the consultant.
TIPS FOR AVOIDING FRAUD:
- Do not agree to meet with strangers whose services you have not solicited. Ask friends and relatives to refer you to their consultants who are licensed and have a proven track record of sound financial advice. Go to their office to discuss business so that you are in control of how long the appointment Check credentials lasts. Do not take your checkbook to the first appointment!
- Check the credentials of the investment advisor by contacting the National Association of Securities Dealers. with the Department of Insurance if the investments contain insurance products such as annuities.
- Ask for a business card with the consultantís full name, license number, permanent street address (not a P.O. Box) and office phone number. Do not do business with an advisor who operates from a message service, cell phone or pager. Drive by the address and call the office number to verify that the office does exist.
- Ask for a list of references and check every one of them yourself.
- Check out all rates of return claims by asking for the period of time they were achieved in. If advertisements donít include this information, look for another advisor.
- If you are interested in an investment, request a prospectus by mail. Never give an investment check to a courier.
- The minute you suspect that you have been scammed, notify Department of Corporations, Investigations Division.
To check credentials or report investment fraud:
National Association of Securities Dealers at 1-800-289-9999
California Department of Insurance at 1-800-927-4357
California Department of Corporations at (213)576-7500
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