Unlucky Investor Traps


1 | Affinity fraud. Con artists target members of religious, political or ethnic groups.

2 | Churning. Unethical securities professionals make unnecessary or excessive trades to generate commissions.

3 | Equity-indexed certificates of deposit. In a volatile market, these uninsured CDs pose liquidity problems and are not suitable for most seniors.

4 | Oil and gas investment fraud. Sales materials provide “official looking” surveyor maps touting the likelihood that the “managers” of the drilling enterprise will hit pay dirt.

5 | Personal information scams. In the guise of helping customers fill out forms to qualify for legitimate benefits, the scammer collects information about personal financial assets.

6 | Prime bank schemes. These schemes promise high-yield, tax-free returns often purported to result from “off-shore trades of bank debentures.”

7 | Pump and dump schemes. Unethical broker-dealers frequently “pump” up the value of low-priced securities that are traded on Nasdaq “pink sheets” and then “dump” the stock after naïve investors have bought in at the inflated prices.

8 | Recovery rooms. Scam artists buy and sell the names of victims who have lost money to “recovery room” operators who promise, in return for a fee that the victim must pay in advance, to recover the money lost in a worthless investment.

9 | Registered high-interest promissory notes publicly advertised. These high-risk notes are not suitable for retirement funds.

10 | Sale and leaseback contracts. Investors are sold a piece of equipment such as a payphone, ATM machine or Internet booth located at a remote venue, where the investor cannot service and maintain the equipment and must enter into a servicing agreement.

Source: North American Securities Administrators Association.

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