Anyone can become a victim of fraud. And, as financial fraud can be devastating to someone’s financial future, proactive steps should be taken by each and every investor to prevent its occurrence. Review the top investment scams outlined below to increase your level of knowledge, enabling your ability to avoid the possibility of them occurring to you.

The Top 10 Investment Scams

(Rated by the North American Securities Administrators Association):
  • Unlicensed Individuals- Verify that the individuals who are selling securities or insurance products have the licenses to be able to act in this capacity.
  • Affinity Group Fraud- Some individuals will utilize their religious affinity or association with a particular ethnic group to attract customers.
  • Payphone & ATM Sales- Many of these “too good to be true” investment opportunities are in fact nothing but Ponzi schemes, getting thousands of people to part with millions in order to participate in what they believe to be a legitimate business opportunity.
  • Promissory Notes- Some companies will issue short term debt instruments which promise high returns and little to no investment risk, but never pay out to investors.
  • Internet Fraud- The Internet provides an excellent forum for scammers to attract investors, particularly for ‘bogus’ off shore investments and get rich quick schemes.
  • Ponzi/Pyramid Schemes- These business or investment opportunities offer investors the opportunity to capitalize on high returns, but the only people who are able to generate returns are those who set the concept into motion.
  • Callable CDs- Redeeming a CD early may cause the investor to experience significant losses, upwards in some cases of 25% of their original investment. Calling an investment refers to the process in which the underlying organization redeems them earlier than their stated maturity.
  • Viatical Settlements- These settlements were originally intended to provide needed capital to the gravely ill. The insured party will get a percentage of the death benefit today and in exchange, the investors will receive the total death benefit upon the insured party’s death.
  • Prime Bank Schemes- Some organizations will offer triple-digit returns to investors through access to the investment portfolios of the world’s elite banks. In most cases, these investment opportunities cater to those who believe in conspiracy theories and believe that these private investment opportunities are in ‘secret investments’.
  • Investment Seminars- In some cases, individuals who have become rich will host seminars, sell books, audiotapes or other services to individuals seeking the same levels of financial success. Financial regulators recommend that individuals act in a sceptical manner toward promises that they will become rich if they follow in these individual’s footsteps.

While none of us can fully prevent financial fraud from occurring to us, we can take educated, proactive steps to avoid these common investment schemes outlined above. Investors should always be leery of opportunities which appear to be ‘too good to be true.’