Investment Scams – South Florida Securities and Investment Fraud and Misrepresentation FINRA Arbitration and Litigation Attorney:
When it comes to making an intelligent investment decision, nothing is fool- proof. However, there are some basic sales tactics that should turn your “red light” on. Some of the most common include:
The “Phantom Riches” Tactic: Here the salesperson dangles the prospect of wealth, enticing you with something you want but can’t have. “These gas wells are guaranteed to produce $6,800 a month in income.”
The “Source Credibility” Tactic: Here the salesperson tries to build credibility by claiming to be a reputable expert. “Believe me, as a senior vice president of XYZ Firm, I would never sell an investment that doesn’t produce.”
The “Social Consensus” Tactic: Here the salesperson leads you to believe that other savvy investors have already invested. “This is how ___ got his start. I know it’s a lot of money, but I’m in-and so is my mom and half her church-and it’s worth every dime.”
The “Reciprocity” Tactic: The salesperson offers to do a small favor for you in return for a big favor. “I’ll give you a break on my commission if you buy now-half off.”
The “Scarcity” Tactic: The salesperson creates a false sense of urgency by claiming limited supply. “There are only two units left, so I’d sign today if I were you.”
If these tactics look familiar, it’s because legitimate marketers use them, too. However, when we are not prepared to resist them, these tactics can work subliminally. Little wonder that victims often say to regulators or their attorneys after they have been scammed, “I don’t know what I was thinking” or “it really caught me off guard.” Recently, we have seen a lot of this in precious metals scams. That’s why an important part of resisting these common persuasion tactics is to understand them before encountering them.
What are some Red Flags of Fraud:
Guarantees: Be suspect of anyone who guarantees that an investment will perform a certain way. All investments carry some degree of risk.
Unregistered products: Many investment scams involve unlicensed individuals selling unregistered securities-ranging from stocks, bonds, notes, hedge funds, oil or gas deals, or fictitious instruments, such as prime bank investments.
Overly consistent returns: Any investment that consistently goes up month after month-or that provides remarkably steady returns regardless of market conditions-should raise suspicions, especially during turbulent times. Even the most stable investments can experience hiccups once in a while.
Complex strategies: Avoid anyone who credits a highly complex investing technique for unusual success. Legitimate professionals should be able to explain clearly what they are doing. It is critical that you fully understand any investment you’re seriously considering-including what it is, what the risks are and how the investment makes money.
Missing documentation: If someone tries to sell you a security with no documentation-that is, no prospectus in the case of a stock or mutual fund, and no offering circular in the case of a bond-he or she may be selling unregistered securities. The same is true of stocks without stock symbols.
Account discrepancies: Unauthorized trades, missing funds or other problems with your account statements could be the result of a genuine error-or they could indicate churning or fraud. Keep an eye on your account statements to make sure account activity is consistent with your instructions, and be sure you know who holds your assets. For instance, is the investment adviser also the custodian of your assets? Or is there an independent third-party custodian? It can be easier for fraud to occur if an adviser is also the custodian of the assets and keeper of the accounts.
A pushy salesperson: No reputable investment professional should push you to make an immediate decision about an investment, or tell you that you’ve got to “act now.” If someone pressures you to decide on a stock sale or purchase, steer clear. Even if no fraud is taking place, this type of pressuring is inappropriate.
If you don’t feel comfortable in talking to the person that has contacted you and you can’t get off the phone, just hang up. The only thing that is going to happen is that you will more than likely save yourself money.
With extensive courtroom, arbitration and mediation experience and an in-depth understanding of securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.
At the Fort Lauderdale Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.