Unregistered and Unlicensed Sellers. Always check whether the person offering to sell you an investment is registered and licensed, even if you know him or her personally. Unregistered and unlicensed persons commit many of the frauds that target older investors. Researching the background of the individuals and firms selling you investments, including their registration/license status and disciplinary history, is easy and free:
- Use Investor.gov’s free online database to search for your investment professional.
- Contact your state securities regulator.
You can also call the SEC’s Office of Investor Education and Advocacy directly to help research the person and firm selling you the investment: (800) 732-0330 (open 9:00 a.m. to 5:30 p.m. EST Monday through Friday).
Promises of High Returns with Little or No Risk. The promise of a high rate of return, with little or no risk, is a classic warning sign of investment fraud. Every investment carries some degree of risk, and the potential for greater returns usually comes with greater risk. Avoid putting money into “can’t miss” investment opportunities or those promising “guaranteed returns.” Remember – if it sounds too good to be true, it probably is.
Pressure to Buy Quickly. No reputable investment professional should push you to make an immediate decision about an investment, or tell you that you have to “act now.” If someone pressures you to decide on an investment without giving you time to do your research, walk away.
Free Meals. Be wary of “free lunch” seminars. The ultimate goal of free meal investment seminars is typically to lure new clients and to sell investment products, not to educate the public. If you decide to attend one, commit to yourself before the seminar that you won’t purchase anything or open an account while at the seminar. Even if the free meal does not come with a high-pressured sales pitch, you should expect the “hard sell” in subsequent contacts from the person selling the investment.
Red Flags in the Financial Professional’s Background. Even if an investment professional is in good standing with his or her regulators, you should be aware of potential red flags in the professional’s background. SEC, FINRA, and state securities regulator records can be used to identify red flags for potential problems, including: (1) employment at firms that have been expelled from the securities industry; (2) personal bankruptcy; (3) termination; (4) being subject to internal review by an employer; (5) a high number of customer complaints; (6) failed industry qualification examinations; (7) federal tax liens; and (8) repeatedly moving firms.
- If you are thinking about investing and have any questions, do not hesitate to call the SEC’s Office of Investor Education and Advocacy at (800) 732-0330 or ask a question using this online form.
- A Guide For Seniors: Protecting Yourself Against Investment Fraud.
- Social Media and Investing: Tips for Seniors.
- Stopping Affinity Fraud in Your Community
- Investor Bulletin and Consumer Advisory: Planning for Diminished Capacity and Illness
Investors can also order hard copies of our free publications by calling (800) 732-0330, or access them on the Internet through the SEC’s Investor.gov website. For additional educational information for investors, see Investor.gov.
The Office of Investor Education and Advocacy has provided this information as a service to investors. It is neither a legal interpretation nor a statement of SEC policy. If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law.