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The North American Securities Administrators Association (NASAA) has released a new list of investment schemes that are used to cheat investors out of hundreds of millions of dollars each year.
Here are the top 10 threats to investors for 2005 according to NASAA. The order is based on prevalence and seriousness as identified by an annual survey of state securities regulators:
<b>Ponzi Schemes</b>: Named after Charles Ponzi, these are pyramid schemes that use money from later investors to pay early ones. The only people who make money are the promoters who set the plan in motion.
<b>Unlicensed Individuals Selling Securities</b>: Be aware of anyone selling securities without a valid securities license. They should immediately put up a red flag for any investor. Always ask to see a license if you are unsure.
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<b>Unregistered Investment Products</b>: Due to strict state registration requirements on most investment products, con artists avoid this by selling "investment products" that are not registered such as viatical settlements, pay telephone and ATM leasing contracts, etc. These investment contracts usually come with the promise of limited or no risk and high returns.
<b>Promissory Notes</b>: Many of these notes which promise to pay an amount at a later date are worth less than the paper on which they are printed.
<b>Senior Investment Fraud</b>: Due to higher amounts in their saving accounts than most Americans, they are a favorite target for con artists. Senior citizens face numerous types of investment fraud such as unsecured promissory notes, viatical settlements and other investments that are either fraudulent or unsuitable for them based on their particular financial needs.
<b>High-Yield Investments</b>: If it sounds to good to be true, it probably is. Still, con artists are able to entice many investors with promises of triple-digit returns through access to “risk free guaranteed high yield instruments” or something equally deceptive.
<b>Internet Fraud</b>: Stock promoters use the easy communications of the Internet such as instant messaging and fake websites to entice investors into “pump-and-dump” stock schemes.
<b>Affinity Fraud</b>: Co artists know that if it is something that you know and are familiar with, then they are more likely to be able to pull off the con. They are therefore increasingly targeting specific religious, ethnic, cultural and professional groups.
<b>Variable Annuity Sales Practices</b>: Mainly targeted toward senior citizens, agents take huge surrender fees and large sales commissions when they move investors into variable annuities.
<b>Oil & Gas Scams</b>: With oil prices at record levels and continued unrest in the Middle East, regulators believe that it's only a matter of time before con artists begin promoting schemes promising quick profits in oil and gas ventures.
The NASAA also lists three investment opportunities that didn't make the top ten, but it feels deserves "dishonorable mention":
- penny stocks
- private placements
- investment seminars
The NASAA urges investors to take care when looking at different investments and at a minimum ask the following questions:
- Are the seller and investment properly licensed and registered in your state?
- Has the seller given you written information that fully explains the investment?
- Are claims made for the investment realistic?
- Does the investment meet your personal investment goals?
Here are the top 10 threats to investors for 2005 according to NASAA. The order is based on prevalence and seriousness as identified by an annual survey of state securities regulators:
<b>Ponzi Schemes</b>: Named after Charles Ponzi, these are pyramid schemes that use money from later investors to pay early ones. The only people who make money are the promoters who set the plan in motion.
<b>Unlicensed Individuals Selling Securities</b>: Be aware of anyone selling securities without a valid securities license. They should immediately put up a red flag for any investor. Always ask to see a license if you are unsure.
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<b>Unregistered Investment Products</b>: Due to strict state registration requirements on most investment products, con artists avoid this by selling "investment products" that are not registered such as viatical settlements, pay telephone and ATM leasing contracts, etc. These investment contracts usually come with the promise of limited or no risk and high returns.
<b>Promissory Notes</b>: Many of these notes which promise to pay an amount at a later date are worth less than the paper on which they are printed.
<b>Senior Investment Fraud</b>: Due to higher amounts in their saving accounts than most Americans, they are a favorite target for con artists. Senior citizens face numerous types of investment fraud such as unsecured promissory notes, viatical settlements and other investments that are either fraudulent or unsuitable for them based on their particular financial needs.
<b>High-Yield Investments</b>: If it sounds to good to be true, it probably is. Still, con artists are able to entice many investors with promises of triple-digit returns through access to “risk free guaranteed high yield instruments” or something equally deceptive.
<b>Internet Fraud</b>: Stock promoters use the easy communications of the Internet such as instant messaging and fake websites to entice investors into “pump-and-dump” stock schemes.
<b>Affinity Fraud</b>: Co artists know that if it is something that you know and are familiar with, then they are more likely to be able to pull off the con. They are therefore increasingly targeting specific religious, ethnic, cultural and professional groups.
<b>Variable Annuity Sales Practices</b>: Mainly targeted toward senior citizens, agents take huge surrender fees and large sales commissions when they move investors into variable annuities.
<b>Oil & Gas Scams</b>: With oil prices at record levels and continued unrest in the Middle East, regulators believe that it's only a matter of time before con artists begin promoting schemes promising quick profits in oil and gas ventures.
The NASAA also lists three investment opportunities that didn't make the top ten, but it feels deserves "dishonorable mention":
- penny stocks
- private placements
- investment seminars
The NASAA urges investors to take care when looking at different investments and at a minimum ask the following questions:
- Are the seller and investment properly licensed and registered in your state?
- Has the seller given you written information that fully explains the investment?
- Are claims made for the investment realistic?
- Does the investment meet your personal investment goals?