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.
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 about it 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 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.” Its 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 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 Financial Fraud Enforcement Task Force was created in November 2009 “to hold accountable those who helped bring about the last financial crisis as well as those who would attempt to take advantage of the efforts at economic recovery . . . With more than 20 federal agencies, 94 US Attorneys’ Offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.”
Here you’ll find: education on different types of fraud, how to protect yourself against fraud, ways to report fraudulent activity, resources for victims of fraud, publications and easy-to-understand video presentations on topics investors should know that pertain to combating investment fraud.
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, common fraud schemes, a “most wanted” list, and definitions for terms investors should know.
The Financial Industry Regulatory Authority is “an independent, not-for-profit organization authorized by Congress to protect America’s investors by making sure 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.
[Editor’s Note: To learn more about this and related topics, you may want to attend the following webinars: Basic Investment Principles 101 – From Asset Allocations to Zero Coupon Bonds and Investing in Commercial Real Estate. This is an updated version of an article originally published on August 26, 2014.]
Adam has served for the past 17 years as editor-in-chief of four titles for Law Journal Newsletters, a division of American Law Media. He is also a licensed attorney.
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