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Top 10 investor threats expanded to 15

October 17, 2013

The following story appeared in the USA Today on October 15, 2013:

The North American Securities Administrators Association expanded its top 10 investor threats to 15 this year to accommodate new small-business scams.

Many of the threats have been long-standing scams popular in the nation’s five-star boiler rooms — risky (or fake) oil and gas drilling schemes, for example, as well as fake high-yielding investments. The latter would have been familiar to Charles Ponzi, the 1920s swindler who promised huge returns over short periods of time using investments in international postal reply coupons.

But state securities regulators are seeing new schemes this year. Among them:

Proxy trading accounts. Swindlers get authorization to trade on your behalf.

Digital currency. Looking for a replacement for the greenback? If you own gold, you can lose money, but at least you’re left with something you can hold in your hand. “Investors should be aware that investments that incorporate abstract money systems present very real risks, including the possibility of virtual reality leaving an investor virtually broke,” the NASAA says.

Self-directed IRAs. You can use your IRA money for a number of non-traditional investments, such as real estate or small businesses. But because the process can be complicated, self-directed IRAs are a good way for criminals to tap into the public’s distrust of Wall Street and scam your money.

Crowd-funding scams. The Jumpstart Our Business Startups Act has made it easier for small businesses to raise capital from investors, but it has also made it easier for con artists to rise bling money from marks. Small businesses are increasingly getting ripped off by crowd-funding portals, which promise to do the hard work for you, the NASAA says.

Just because there are new scams out there, don’t forget the old ones, which are remarkably effective in relieving investors from their cash. Typically, these scams involve whatever is popular or in the news — oil and gas schemes, for example.

Don’t feel safe because it’s a friend who’s offering a great new investment deal. Many fraudsters reach out and put the touch on friends, families and church members.

Another favorite scam: real estate investment schemes, which piggyback on the rising housing market. “Even as housing prices continue to recover in many U.S. markets, investors should be aware that schemes related to new real estate development projects or buying, renovating, flipping or pooling distressed properties, are popular with con artists,” the NASAA says.

Always check out brokers soliciting your business. One place to start: the Securities and Exchange Commission’s Investment Adviser Public Disclosure site. If your investment adviser is registered with the SEC, you can check out his record with the SEC at www.sec.gov. You can check your broker’s record through the Financial Industry Regulatory Authority’s (FINRA) BrokerCheck website (www.finra.org).

For the full list of 2013’s scams, or to find out how to contact your state securities regulator, go to www.nasaa.org.