USVI Public Records

Document text

Fighting Fraud 101 Smart Tips for Investors 2 3 Who We Are FINRA is a not-for-profit organization dedicated to investor protection and market integrity. The FINRA Investor Education Foundation (FINRA Foundation) supports innovative research and educational projects that give underserved Americans the knowledge, skills, and tools to make sound financial decisions throughout life. FINRA and the FINRA Foundation do not sell investment products, promote products or firms, or offer specific investment advice. The FINRA Foundation ’s Investor Protection Campaign is a targeted, research-based effort to reduce the incidence of investment fraud among investors by teaching the tactics most commonly used by fraudsters and the simple steps every investor can take to reduce their risk. To learn more about the work of the FINRA Foundation, visit FINRAFoundation.org. The U.S. Securities and Exchange Commission’s Office of Investor Education and Advocacy has reviewed this publication. The SEC does not endorse any particular investment product, service, profession, professional or brokerage firm. The Face of Investment Fraud Even if you have never been subjected to an investment fraudster’s sales pitch, you probably know someone who has. Research has shattered the stereotypes of investment fraud victims as isolated, frail, and gullible. Do you know anyone who meets the following description? X Self-reliant when it comes to making decisions X Optimistic X Above-average financial knowledge X Above-average income X College-educated X Open to listening to new ideas or sales pitches If so, then you know someone who fits the profile of an investment fraudster’s prime target. The truth is, we’re all at risk. But you can help protect your family and friends by recognizing how investment fraudsters operate and by reporting suspicious sales pitches and actual scams. 4 5 The Psychology of a Scam We’ve all heard the timeless admonition, “If it sounds too good to be true, it probably is”— great advice, but the trick is figuring out when “good” becomes “too good.” There’s no bright line. Investment fraudsters make their living by making sure the deals they tout appear both good and true. Fraudsters look for your Achilles’ heel. By asking seemingly benign questions—about your health, family, political views, hobbies or prior employers—they know which buttons to push. Then, they will bombard you with a flurry of persuasion tactics, which can leave even the savviest person in a haze. Fraudsters—who spend their “careers” developing schemes to defraud victims—are continually creating new, innovative scams. Knowing the exact scam is not as important as understanding the types of persuasion tactics that are applied across many different schemes. Learning to recognize these tactics can help you avoid being a victim. Common tactics include: X The “Phantom Riches” Tactic – dangling the prospect of wealth, or of risk-free, guaranteed investments—which, in reality, don’t exist. “These gas wells are guaranteed to produce $6,800 month in income.” X The “Source Credibility” Tactic – trying to build credibility by claiming to be with a reputable firm, or to have special credentials or experience. “Believe me, as a senior vice president of XYZ Firm, I would never sell an investment that doesn’t produce.” X The “Social Consensus” Tactic – leading you to believe that other savvy investors have already invested. “This is how Warren Buffet got his start. I know it’s a lot of money, but I’m in—and so is my mom and half of her church—and it’s worth every dime.” X The “Reciprocity” Tactic – 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.” X The “Scarcity” Tactic – creating a false sense of urgency by claiming limited supply, limited time or exclusivity. “There are only two units left, so I’d sign today if I were you. Only a few select investors are being brought in on this deal.” 6 7 Protect Yourself­ If these tactics look familiar, it’s because legitimate marketers use them, too. Here are three key strategies to help distinguish good offers from bad ones: Decide now to decide later—Good investments will be there tomorrow. Don’t be pressured into making immediate decisions. Develop a refusal script, then practice saying “No.” Say “I never make investing decisions without first consulting my___. I’ll contact you if I’m still interested.” Fill in the blank with whomever you choose. Or, simply tell the person “I’m not interested. Thank you.” Knowing your exit strategy in advance makes it easier to leave the conversation, particularly if the pressure starts increasing. Better yet, refuse to engage from the outset, especially if the pitch comes over the Internet or via an unsolicited telephone call. Let the call go to voicemail. Do not respond to or click on links in unsolicited emails from unknown senders. Turn the tables and ask questions—A legitimate investment professional must be properly licensed, and his or her firm must be registered with FINRA, the Securities and Exchange Commission (SEC), or a state securities regulator—depending on the type of business the firm conducts. Check: Verify the answers by checking the seller’s background. Use FINRA’s BrokerCheck, a free online tool that can help you research the backgrounds of investment professionals and firms. BrokerCheck can tell you if an individual or firm is registered, provide an overview of an individual’s work history and the firm’s history. BrokerCheck also provides other important information such as regulatory actions, criminal convictions, and customer complaints involving the investment professional or firm. Using BrokerCheck is easy, visit brokercheck.finra.org or call (800) 289-9999. Check out the investment and confirm what the salesperson tells you using the SEC’s EDGAR database of company filings: SEC’s EDGAR Database www.sec.gov/edgar.shtml Contact your state securities regulator to find out what they know about the company: North American Securities Administrators Association www.nasaa.org ü ü ü Before you invest, ask and check. Ask: Are you and your firm registered with FINRA? The SEC? A state securities regulator? Is this investment registered with the SEC or my state securities regulator? How can I verify this information with a neutral third party? ü ü ü 8 9 Talk to someone first Be extremely skeptical if the person promoting the deal says, “Don’t tell anyone else about this special deal!” A legitimate investment professional won’t ask you to keep secrets. Even if the seller and the investment are registered, it’s always a good idea to discuss these sorts of decisions with family or a trusted financial professional that is not connected to the offer. See the “Resources” panel at the back of this brochure for contact information and a list of other helpful resources. Are you a senior investor with questions about your brokerage account statement or an investment in a brokerage account? FINRA offers a toll-free number that senior investors can call to get assistance from FINRA or raise concerns about issues with brokerage accounts and investments. Call the FINRA Securities Helpline for Seniors® at 844-57-HELPS (844-574-3577) or learn more at www.finra.org/seniorhelpline. ü ü ü ü The answer to “How did they get my name?” is fairly simple: local phone listings, public real estate records, tax assessments on personal property, donations to political or charitable organizations, club rosters, and a host of other sources. Online advertisers use “cookies,” which are small data files that track information about you. Here’s how to cut the clutter: Telemarketing Calls www.donotcall.gov (888) 382-1222 Direct Mail and Email Offers www.dmachoice.org Credit Card Offers www.optoutprescreen.com (888) 567-8688 Online Cookie Collecting www.networkadvertising.org Most legitimate businesses—including securities firms—will honor your request. So, if you receive a solicitation after taking the steps above, you should be all the more skeptical of the offer. Internet-powered phone systems have made it cheap and easy for scammers to make illegal sales “robocalls” from anywhere in the world. It also lets them hide from law enforcement by displaying fake caller ID information. Contact your telephone service provider to see if they offer a call-blocking service or consider purchasing an app or device to intersect these calls. Take Your Name Off Solicitation Lists One easy step you can take to reduce the number of sales pitches you receive is to take your name off of telemarketing and junk mail lists. 10 11 If a Problem Occurs If you believe you have been defrauded or treated unfairly—or if you suspect that someone you know has been taken in by a scam—be sure to send a written complaint to a securities regulator. Here’s where you can turn for help: FINRA Complaints and Tips 9509 Key West Avenue Rockville, MD 20850 Fax: (866) 397-3290 www.finra.org/complaint www.finra.org/fileatip FINRA Securities Helpline for Seniors® Toll-Free: (844) 574-3577 Monday – Friday, 9 a.m. – 5 p.m. Eastern Time www.finra.org/seniorhelpline SEC Office of Investor Education and Advocacy 100 F Street, NE Washington, DC 20549-0213 Phone: (800) SEC-0330 Fax: (202) 772-9295 www.sec.gov/complaint.shtml State Securities Regulator North American Securities Administrators Association Phone: (202) 737-0900 www.nasaa.org For other scams, contact: AARP Fraud Watch Network Helpline Phone: (877) 908-3360 www.aarp.org/money/scams-fraud Resources Before you invest, ask and check. Use these helpful resources for more information about: A Broker or Firm: FINRA BrokerCheck www.brokercheck.finra.org (800) 289-9999 An Investment Adviser or an Investment: SEC’s Public Disclosure Database and EDGAR Database www.investor.gov (800) SEC-0330 State-Specific Information on a Broker-Dealer, Investment Adviser, or Investment: North American Securities Administrators Association www.nasaa.org (202) 737-0900 An Insurance Agent: National Association of Insurance Commissioners www.naic.org (866) 470-6242 A Commodities/Futures/Foreign Exchange Dealer: National Futures Association—BASIC Check www.nfa.futures.org/basicnet (800) 621-3570 Be a Fraud Fighter and help others learn to spot and avoid fraud. Find helpful tools and information at www.FINRA.org/Investors. www.FINRAFoundation.org © 2020 FINRA Foundation. All rights reserved. 20_0016.1 – 01/20 Connect With Us Get the latest news from the FINRA Foundation and our investor protection network: X Subscribe to our e-newsletters: www.finra.org/investors/investor-subscriptions X Like FINRA Foundation on Facebook. X Follow @FINRAFoundation on Twitter.