Protecting Your Investments: Securities Fraud Awareness and Prevention Tips

Securing investments can be a risky endeavor, even if other investors are backing it up. In fact, earlier this year, more than 8,000 investors were tricked into a scheme involving over 8 billion dollars. This is just one example among many cases of securities fraud schemes that plague an otherwise rewarding financial market.

If you’re a regular investor, there are ways to protect yourself from being the next victim of these scams. Read on for our guide on how to prevent securities fraud.

What Is Securities Fraud?

Securities fraud is an umbrella term for a wide range of illegal activities that use deceptive practices in order to take advantage of investors. These often include the manipulation of financial markets or data in order to create a false presentation of the investment that is being solicited.

Common Securities Fraud Examples

As an investor, securities fraud can be hard to spot, especially if the investment offer seems legit at first. Even the best investors are vulnerable to these deceptive practices. However, you can better prepare yourself by taking a look at the most common examples of these situations.

Here are a few of the most commonly seen securities fraud schemes:

  1. High-yield investment fraud is characterized by outlandish “low risk, high reward” investment packages. These generally come from unsolicited offers via phone, e-mails, or in-person approaches. A key thing to remember with these is this: if it sounds too good to be true, it probably is.
  2. “Advance fee” schemes involve a fraudulent broker asking for a small sum of money in advance, promising to dramatically increase the investment over time. These fees can sometimes be disguised as taxes or “processing fees.” However, once the money is given, the investment is never carried through.
  3. Pyramid schemes are one of the most common examples of securities fraud. These types of schemes capitalize by seeking out as many investors as possible, using these funds to pay off earlier investors on the “top” of the pyramid. Although these claim to pay off via legitimate business means, their only true source of income comes from the investors.

Securities fraud is often disguised by “too good to be true” investment packages that promise to yield incredible results. As an investor, you should be sure to be on your guard and obey your intuition if something doesn’t seem right. Again, if it sounds too good to be true, it probably is.

Other Signs of Securities Fraud

Aside from the common formulas used for securities fraud schemes, you can also protect yourself by knowing some general things to look for. If you are presented with an investment opportunity, here are a few things you should consider before moving forward:

  • Is the solicitor using “high-pressure” tactics in order to get you to move quickly on an opportunity?
  • Are they asking for personal information, such as social security numbers, credit card numbers, et cetera?
  • Was the investment offer unsolicited?

If you notice one or more of these things when you’re presented with an investment opportunity, there’s a good chance you’re facing a scam artist. Be on the lookout and obey your instincts in order to avoid being a victim of securities fraud.

Protect Yourself From Securities Fraud

Securities fraud can have a devastating impact on your finances, assets, and life in general. As an investor, it’s urgent to stay aware of these practices and avoid falling victim to high-pressure investment scams. Now that you have some ideas on what to look for, you’ll be better protected in the future.

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