1. Investigate Before You Invest Tools to Avoid Investment Fraud
Office of Investor Education and Advocacy
United States Securities and Exchange Commission
Introduction.
Lori J. Schock, Director
April 26, 2017

2. SEC Disclaimer
The SEC’s Office of Investor Education and Advocacy is providing this information as a service to investors. This is not a statement of official SEC policy or a legal interpretation. If you have questions about the meaning or application of a particular law or rule, please consult with a lawyer who specializes in securities law.*
*Portions of this presentation have been adapted from a presentation of the FINRA Investor Education Foundation.
We are required to give this disclaimer before we speak to audiences.

3. The SEC’s Mission Protect Investors
Maintain Fair, Orderly, and Efficient Markets
Facilitate Capital Formation
The SEC has a 3-part mission: to protect investors, maintain fair markets, and to facilitate capital formation.

4. Office of Investor Education and Advocacy
Responds to complaints and inquiries from investors, and provides educational programs and materials
Processes nearly 20,000 complaints, questions and other contacts from investors annually
Investor.gov is our online resource to help investors make informed investment choices and avoid fraud
2 roles: assistance side and education/outreach side

5. Investor.gov
Just about everything we will cover today in this presentation is derived from resources on Investor.gov.
We also have a seniors section.

6. Tips to Avoid Fraud
Regardless of how old you are, when you’re investing, you need to take steps to avoid scam artists who will try to steal your money.

7. Persuasion Tactics of Fraudsters
Investment fraudsters use the same tactics that used car salesmen use.
They may promise you great unrealistic returns.
They may claim to have fancy titles or specialized expertise.
They may claim that many sophisticated folks have already invested with them – maybe even folks you know or respect.
They may use scarcity tactics or time pressure to make you think you don’t have time to research the investment or if you don’t act quickly, you’ll miss the chance to invest.
And of course they may give you a free dinner or free lunch seminar , or some other enticement to get you to invest – I’ll waive my fee this time for you, or I’ll give you an incentive interest rate if you invest today.
These are all tactics you should be aware of – red flags of fraud.
Source: FINRA Investor Education Foundation

8. Tips for Investors to Avoid Fraud
Research both the financial professional and the investment product
Be aware of common persuasion tactics and red flags
Be alert to common investment scams

9. Ask and Check Check whether the person is registered
Check the background of the broker or investment adviser:
Any disciplinary actions
A history of customer complaints
Previous employment
To avoid being defrauded, you should check the license and registration status of any investment professional before giving them your hard-earned money.

10. Before you invest, Investor.gov
The resources of the SEC are always at your fingertips. You can bookmark our website.
Video

11. Investor.gov
Investor.gov makes it easy to check your investment professional.
Just click the red button on the landing page.

12. IAPD
That will bring you to our IAPD screen and allow you to put in the name of the individual or firm you are researching.
Then you’ll be able to determine if they are licensed and registered; and if they have any disciplinary history, customer disputes, bankruptcies, or criminal charges. Plus you can see their employment history.

13. Is the Product Registered?
Find out whether the company is registered with the SEC – this provides access to important information about the company
Investors can check EDGAR, the SEC’s online database of corporate filings
Scams often involve unregistered companies
In addition to doing your due diligence on the investment professional, you can also research the particular investment you are considering.
We have a tool called EDGAR that allows you to research publicly-traded companies, mutual funds and variable annuities.

14. EDGAR
EDGAR looks like this, and once you type in the name of the company, you can see filings including:
the company’s registration statement,
its periodic disclosures with the SEC,
stock holdings of officers and directors,
and the company’s audited financials.

15. Red Flags of Fraud
It sounds too good to be true: Any investment that sounds too good to be true probably is
Pressure to buy RIGHT NOW: Don’t be pressured into buying an investment before you have a chance to investigate the “opportunity”
Lack of documentation: Be skeptical of investments without documentation reflecting the promoter’s claims
Huge Upside, No Risk!
Incredible Gains!
Breakout Stock Pick!
We find that investment frauds tend to have certain commonalities – and one of the most common tactics is to promise terms that are too good to be true, like zero risk and huge returns. Don’t fall for these claims.
Also, some fraudsters will attempt to pressure you like an unscrupulous used-car salesman. No legitimate investment requires a rash decision.
And if there is nothing in writing – like a prospectus – walk away.

16. Unsolicited Offers to Invest
Investment fraudsters look for victims through social media
If you receive a “can’t miss” offer from someone you don’t know, your best move may be to pass up the “opportunity”
Sometimes offers to invest come out of the blue.
A friend can tell you about a great investment; an ad can pop up on your social media feed; you can get an invitation to an investment seminar; or a stranger can call you about the deal of the century.
You should tread carefully when you didn’t seek out the investment or the seller. Do your homework if you’re tempted by the offer, or better yet, walk away.

17. Fraud Targeted at Seniors
Affinity frauds target members of identifiable groups
Fraudsters often are members of the group or pretend to be
Always “Ask and Check” even if you know the person making the investment offer
Remember: the person telling you about the investment might have been scammed
One type of fraud is especially vexing because it’s when the seller has a connection to us, or a basis for some level of trust. We call it affinity fraud, and it’s where a member of our same cultural, racial, ethnic or religious community seeks us out to invest.
Here again, the same rules apply – we need to check the background of any seller before we invest, even if they go to our church or live in our neighborhood, or share a common background. (Play audio file for Big Frank radio ad) 
You should research the investment and investment professional.
See our alerts on Investor.gov!

18. Before you invest, Investor.gov
One of our PSA ads highlights the need to verify, even if the person shares your faith or goes to your church or synagogue.
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19. Pump-and-Dumps
Involve the hyping (“pump”) of a company’s stock through false or misleading statements
Typically involve “penny-stock” or “microcap” companies
Pitch to buy stock quickly
Once fraudsters “dump” their shares at the pumped-up price, the price falls and investors lose their money
One common investment scheme is called a pump and dump, a type of fraud that typically involves the cheapest of stocks – penny or microcap stocks.
Often promoters will hype a stock to attract investors and raise the stock price, and that’s when they sell their shares. Most investors are left with worthless stock once they realize the companies have no earnings or no assets or business plans.

20. Investment Newsletters
While legitimate newsletters may contain useful information, others are tools for fraud
Fraudsters may lie about the payments they receive and their track records
They may claim to offer unbiased recommendations when they stand to profit
Newsletters advertised on legitimate websites may also be fraudulent
Some companies pay online newsletters to “tout” or recommend their stocks – this isn’t illegal as long as the newsletters disclose who paid them, how much they’re getting paid, and the form of the payment.
Even if these newsletters are advertised on legitimate websites, that doesn’t mean they’re not fraudulent.
Do your own research and checking.

21. Report Suspected Fraud
Involving brokers or investment advisers, contact:
The SEC (800)
FINRA Securities Helpline for Seniors (844)
State securities regulators: Serveourseniors.org/
To report suspected elder abuse in general, locate the appropriate adult protective services agency by calling the Eldercare Locator at (800) , or
Elder financial abuse often violates one or more criminal laws.  To report it, contact your local police or sheriff.
To report suspected elder financial abuse involving brokers or investment advisers, contact:
The SEC at (800) or
FINRA -- Securities Helpline for Seniors at (844) 57-HELPS (43577) or or
Your state securities regulator.  For a contact list of state securities regulators, visit

22. SEC Resources

23. Investor.gov
You click on the seniors tab and you’ll get relevant articles, resources and information for seniors.

24. Investor Alerts and Bulletins
Investor Alert for Seniors: Five Red Flags of Investment Fraud
SEC Warns of Government Impersonators
Variable Annuities—An Introduction
Investment-Related Radio Programs Used to Defraud
Planning for Diminished Capacity and Illness
Social Media and Investing—Tips for Seniors
Here are just a few alerts and bulletins that may be helpful to seniors.

25. Let’s Stay in Touch… Office of Investor Education and Advocacy
U.S. Securities and Exchange Commission
100 F Street NE, Washington, DC
Investor Assistance: |
Investor.gov
@SEC_Investor_Ed
If you have an audience that can benefit from our investor education message, us at

26. Questions? I hope you benefitted from this presentation.
I’d be happy to take questions.