Remember these securities fraud red flags


Once you become familiar with an activity, it’s easy to start overlooking the simple things as you chase the promise of a big win. You always want to do your due diligence. This is especially true when investing in the securities market, where big sums of money can be at stake.

Consider this: The median loss for securities and investment fraud offenses in 2017 was more than $2.1 million. Fraudsters know this and will do everything they can to get your money. Help protect yourself by taking a moment to go over a few investment fraud red flags.

It sounds too good to be true

As is the case with anything in life, if something sounds too good to be true, it very likely is. Overpromising is a common tactic by con artists. Remember there’s no such thing as a “guaranteed return.”

If someone is promising a high return, do your own independent research before making a decision. Don’t simply trust their word.

Records discrepancies

Always do your homework. Consider asking for more information such as where the company is incorporated, then do your own check to find its annual reports. You might also want to ask for other financial information – statements, an offering circular or prospectus, for example – and compare it against what you were pitched. You could also see if anyone has filed a complaint regarding the company.

If all this information isn’t lining up, or you find discrepancies, consider it a red flag.

High-pressure pitches and immediacy

A representative asking for money immediately, or stressing that this is an opportunity many investors are jumping on, may be using sales tactics to get you on board before you can do your homework. Don’t fall for it – always take time to check key documents and records so you can make an informed decision.

An aggressive approach

Intense, unsolicited offers may be a sign something is off. If a pitch came to you out of the blue, try to verify exactly who the person is, regardless of if they seem trustworthy. You may also want to ask if they’re being paid to promote this investment opportunity. If the opportunity involves vague foreign or off-shore investments, those might also be troubling signs.

What to do when in doubt

If you are ever uncertain about an investment opportunity, it’s rarely a bad idea to check with a broker, financial advisor or an attorney. They may be able to help verify whether the opportunity appears legitimate.

With so much money at stake, there will be people trying to take advantage and game the system. No matter how experienced you may be, it’s important to know the warning signs to help protect your hard-earned wealth.