A company claims to hold third-party real estate loans that promise to generate high interest. In return for their money, investors will be given a promissory note reflecting the loan. The offer is marketed as conservative and “low risk.” Sound like a good investment?
For more than 8,000 investors, this seemingly safe investment turned out to be a $1.3 billion Ponzi scheme orchestrated by Woodbridge founder Robert Shapiro. Investors, many of whom were senior citizens, soon learned that their money was being used to pay previous investors, and many of the real estate properties associated with the loans didn’t even exist. In 2022, Ponzi schemes accounted for a collective $5.3 billion in potential investor losses, according to PonziTracker.com, a project by attorney white-collar crime expert Jordan Maglich.
The smart investor is always on guard against potential investment fraud. Thorough due diligence is the best way to prevent yourself from falling prey to unscrupulous or deceptive investment opportunities, but you don’t have to go it alone.
If you run across something that looks like a scam or seems too good to be true, or if something else just doesn’t look right, consider the following resources or just browse them to find the latest information available on fraud.
The North American Securities Administrators Association (NASSA) is a voluntary association whose membership works to be the “voice of state securities agencies responsible for efficient capital formation and grass-roots investor protection.” NASSA’s fundamental mission is to protect consumers who purchase securities or investment advice. Its jurisdiction extends to a wide variety of issuers and intermediaries who offer and sell securities to the public.
Here you’ll find: investor education, fraud alerts, and tips; legislative, regulatory, and legal news; publications; speeches and reports — all geared toward helping to educate and inform investors.
The Securities Investor Protection Corporation (SIPC) oversees the liquidation of member broker-dealers that close when the broker-dealer is bankrupt or in financial trouble and customer assets are missing. “While a number of federal and state securities agencies and self-regulatory organizations deal with cases of investment fraud, SIPC’s focus is both different and narrow: restoring customer cash and securities left in the hands of bankrupt or otherwise financially troubled brokerage firms.”
Here you’ll find: cases and claims, education, FAQs about customer protections and brokerage firms, forms to file, news, publications, and special reports about what SIPC does and how investors can benefit.
The Federal Trade Commission (FTC) is an independent, bipartisan agency of the U.S. government. Its mission is “Protecting the public from deceptive or unfair business practices and from unfair methods of competition through law enforcement, advocacy, research, and education.” The FTC is “the only federal agency that deals with consumer protection and competition issues in broad sectors of the economy.”
Here you’ll find: cases, policy, education, advice, guidance, fraud news and events, forms to file, news, publications, and information about what the FTC does and how consumers and investors can benefit.
The FBI investigates a gamut of crimes, including terrorism, counterintelligence, public corruption, civil rights, organized crimes, violent crimes, and major theft. The array of “white collar” crimes (or, as the FBI calls it, “lying, cheating, and stealing”) they investigate includes:
Here you’ll find: reporting platforms for fraud issues, education on how to spot fraud in an investment, fraud awareness and prevention tips, typical fraud schemes, a “most wanted” list, and definitions for terms investors should know.
The Securities and Exchange Commission (SEC) was formed during the Great Depression with the mission of “protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation.”
USA.gov says, “The SEC oversees securities exchanges, brokers, dealers, investment advisors, and mutual funds to promote fair dealing, the disclosure of important market information, and to prevent fraud.” Public companies and broker-dealers must file periodic financial statements and disclosures to the SEC.
The SEC’s Office of Investor Education and Advocacy “handles complaints by individual investors against brokers, brokerage firms, investment advisers, transfer agents, mutual funds, and other market participants” about various problems involving investments, investment accounts, or a financial professional.
Investors can file a complaint through a form on the SEC website.
Here you’ll find: regulations, cases, filings, rules, education, information about what the SEC does to protect investors and the markets, a company filing search, news, press releases, and statements.
The Financial Industry Regulatory Authority is “an independent, not-for-profit organization authorized by Congress to protect U.S. investors by ensuring the securities industry operates fairly and honestly” by enforcing high ethical standards, bringing the necessary resources and expertise to regulation, and enhancing investor safeguards and market integrity. This includes deterring misconduct by enforcing the rules, disciplining rule breakers, detecting and preventing wrongdoing in U.S. markets, resolving securities disputes, and educating and informing investors.
Here you’ll find: The FINRA Investor Education Foundation, BrokerCheck (so you can search for information on a specific broker); the Market Data Center for investment and market research; a Fund Analyzer with information on thousands of mutual funds and ETFs, among others; and a Scam Meter for investors to explore if their potential investment may be fraudulent.
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This is an updated version of an article originally published on August 26, 2014, and previously updated on October 29, 2019.]
©2023. DailyDACTM, LLC d/b/a/ Financial PoiseTM. This article is subject to the disclaimers found here.
Adam Schlagman is a practicing lawyer who has served as Editor-in-Chief for LJN, the newsletter division of ALM (American Lawyer Media) for more than 20 years. The specialty journals: The Bankruptcy Strategist, The Corporate Counselor, LJN’s Equipment Leasing Newsletter, and Cybersecurity Law & Strategy provide practical information and guidance for practicing attorneys. The published articles…
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