Protecting Your Money

Know the Red Flags of Fraud

No matter your rank, how much money you have, or how financially savvy you are, scammers may approach you with get-rich-quick schemes and other frauds.  
 

Red Flags of Fraud

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What You Can Do To Avoid Investment Fraud

Researchers have found that investment fraudsters hit their targets with an array of persuasion techniques that are tailored to the victim's psychological profile. Protect your investments by watching out for these red flags:

  1. It sounds too good to be true 
  2. "Guaranteed returns" (they don't exist)
  3. The "halo" effect, which makes con artists seem likable or trustworthy
  4. "Everyone is buying it" pitches
  5. Pressure to send money right now
  6. Small favors (free lunch or workshop)

Always Check Out an Investment Professional Before Investing

Many cases of investment fraud involve so-called “professionals” who are not properly registered. You can find out if an investment professional is registered by using the search tool below. If registered, you can also see if he or she has a disciplinary history or customer complaints. Questions? Call the SEC’s toll-free investor assistance line at 800-732-0330.  
 

Do Your Research

Any offer or sale of securities must either be registered with the SEC or exempt from registration. Otherwise, it is illegal. While some companies that do not register or file reports with the SEC may be exempt from registration, you assume more risk when you invest in a company about which little or no information is publicly available. You should always check whether an offering is registered with the SEC by using the SEC’s EDGAR database, or by contacting the SEC’s toll-free investor assistance line at 800-732-0330.  

Be Alert to Fraud Targeting the Military

Some frauds target members of groups, such as older investors or religious or ethnic communities, and even the military. The SEC has brought cases where scams targeted military members and their families—and in some cases the scammers had even served in the military. Even if you know the person making the investment offer, be sure to check out both the investment and the investment professional’s background—no matter how trustworthy the person seems.

Be on the Lookout for Fraud

The rapid growth of Initial Coin Offerings (ICOs) and digital assets presents individual investors with many questions. But remember: any investments that promise high returns, claim to have little or no risk, or use social media or high pressure sales tactics are often scams. You should never make an investment unless you understand the risks. Also, tread carefully if an investment touts a celebrity endorsement or claims to have government approval or sponsorship.  

If you see something that might be an investment fraud, submit a tip, complaint or referral at www.sec.gov/tcr. 

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