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Regulatory Guidelines Update


The Pennsylvania Securities Commission (PSC) recently issued its annual report of top traps for investors to beware of.  There are always new scams in the making which utilize slick sales pitches and empty promises.  Always remember that the greater the potential return, the greater the risk!


Top traps for investors include the following:

Affinity Fraud: Con artists are targeting religious, ethnic, cultural and professional groups, which they sometimes join to establish trust.  They also may recruit a respected member of a community or religious congregation to promote their scheme.

Internet Fraud: Scam artists especially like using the Internet to lure investors into “pump-and-dump” stock schemes.  Investors should be wary of overly positive claims through unsolicited E-mails, instant messages and phony Web sites.

Investment Seminars: These are often the perfect feeding ground for persuading investors into fraudulent investments.  Be cautious of free lunches and “higher returns with little or no risk.”

Oil and Gas Scams: The rise of oil and natural gas prices have fueled an industry of alternative energy, which is attractive to investors.  Most investments are highly risky and inappropriate for small investors.

Unlicensed Individuals & Unregistered Products: All investment managers and those selling securities should have a valid license to give advice.  Con artists find ways to bypass state registration requirements to pitch viatical settlements (a financial transaction in which a company buys life insurance policies from the terminally ill at less than their face value and may sell the policies to investors), pay telephone and ATM leasing contracts, and other investment contracts with the promise of “limited or no risk” and high returns.

Unsuitable Sales: Security professionals who do not know their customers’ financial situation or who make unreasonable recommendations should be a huge red flag to investors.  For example, variable and equity-indexed annuities are often unsuitable for senior citizens because these products are generally long-term investments that limit access to invested funds.  The sales agent typically benefits by earning commissions on these investment products.

When in doubt, contact the Pennsylvania Securities Commission for more advice on how to avoid an investment trap on their Web site or call toll free at (800) 600-0007.


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