(CNBNews)(December 30, 2020)--Stock fraud is on the rise, which is a violation of securities laws. Investors deal with securities fraud on a daily basis, which leads to bad investment decisions due to manipulated or false details.
To avoid getting scammed, you need to ask for documentation before investing, avoid limited offers, and stay away from unregistered firms. Additionally, ask for financial statements, and seek advice from your securities expert. Continue reading to learn more.
1. Avoid Falling for High Return Promises
In most cases, security fraudsters promise investors very high returns on their investments after buying a particular stock. If you notice the difference is too high compared to others in the market, it's probably a scam.
The get-rich-quick approach is the trick used by such scammers since it entices many people. A report by Forbes highlighted some scenarios where many investors lost money because the offers they accepted were too good to be true.
If you notice that a product has a considerable investment outcome with almost no risks, beware. Still, if an investor promises that a particular stock has a guaranteed return, that's a lie. All equity investments carry a modicum of risk.
2. Watch out for Emails, Social Media Ads, TV Ads, and Email Posting
Many novice investors use social media and the internet to look for securities and do in-depth research. However, cybercriminals are also adapting to these modern technologies so that they can defraud unsuspecting people. They try to develop banners that show big-money opportunities or emails that direct you to invest in new opportunities. They can also go a notch higher to indicate that a famous person is also investing.
These are social media and internet fraudsters since no legit company would use these methods to reach out to clients. No matter how persuasive the scammers are, don't give in. Late-night TV adverts are also used to mostly target older people, who may assume the details are accurate. In this case, if you don't have any evidence about the company, don't fall into the trap.
3. Check out your Salesperson
Some people trust salespersons simply because they have been referred to them by a friend or follow them on social media. Others feel they are well connected with them since they are from a well-respected company. It's vital to ensure that they are a licensed investment professional.
It would be best to check them out on a reliable database, usually one under the Financial Industry Regulatory Authority (FINRA). It's a non-government group that oversees securities dealers and firms. Alliteratively, you can do a quick check via Investor.gov at no charge.
4. Ask Relevant Questions
Ask about the professional's historical background with government regulators. Inquire about their experience level and their credentials. Additionally, you need to know how to pay for services and how your potential investment professional gets paid. Ask the products and services offered from bonds, stocks, or options. The US Securities and Exchange Commission avails a comprehensive resource for questions you can ask.
Other questions can include:
- What factors will affect your investment value?
- How does the investment make money?
- What risks come along with the investment?
- How is the company's performance so far?
- What are the fees required to buy, maintain, or sell the investment?
From the above, it's evident that investors deal with securities fraud on a daily basis. It’s a growing problem that isn’t going away anytime soon, so buyer beware. Follow the tips in this article to save yourself from incurring financial losses. En is worth it when it comes to your hard-earned money.