Watch for tactics used by investment fraudsters


Falling victim to a fraudulent investment scheme can mean losing anywhere from a few hundred dollars to your entire life savings. Investment scams and schemers are getting more sophisticated, and each year, investors lose millions of dollars to securities fraud.

It’s becoming increasingly difficult to recognize investment scams. By using real-life situations, creating fake copies of the websites of legitimate businesses, and sharpening their skills to outwit even savvy investors, scammers make it increasingly difficult to recognize investment scams. They are experienced at the art of persuasion and know which questions to ask to make you most susceptible to their pitch.

Don’t be rushed or pressured into an investment. Making a rash decision today could be something you regret for many years to come.

FINRA Investor Education Foundation provides some interesting theories on the science behind some of the most common scam tactics:

Phantom Riches -- dangling 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.”

Source Credibility -- trying to build credibility by claiming to be with a reputable firm or to have a special credential or experience. “Believe me, as a senior vice president of XYZ Firm, I would never sell an investment that doesn’t produce.”

Social Consensus -- leading you to believe that other savvy investors have already invested. This could also be called “If everyone else is doing it, I should too”.

Reciprocity -- offering 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.”

Scarcity -- creating a false sense of urgency by claiming limited supply. “There are only two units left, so I’d sign today if I were you.”

BBB also provides the following checklist to keep from being a victim of investment fraud:

Virtually all fraudulent investment schemes involve the sale of unregistered securities. Find out if the security, and the individual offering it are registered by contacting the Texas State Securities Registration Division at (512)305-8300.

No investment is risk free, but scam artists will try to convince you otherwise. Be wary of individuals who promise a rate of return better than what similar investments are paying or who makes guarantees that the investment will not fail.

Keep copies of all completed forms and agreements.

Get and read all information about the risks, obligations, restrictions, and costs of any investment in writing before making the investment.

Make sure you can access your accounts in a timely manner and are aware of all the restrictions and limitations on access.

Know exactly how much the investment will cost with regard to fees, commission, and, penalties, and other charges.

Keep in mind, the more complex the investment, the more wary you should be in investing in it.

For more tips on smart buying, donating and investing, go to To report a fraudulent activity or unscrupulous business practices, please call the BBB Hotline: 903-581-8373 or go to BBB Scam Tracker.


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