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FINRA Podcast: "Avoiding Investment Scams"

In FINRA's latest investor podcast, Dan Rutherford and Gerri Walsh address how investors can identify and avoid investment scams.  As we discussed in our August 26 post, NASAA's List of Investor Traps, investment scams take all kinds of forms, each promising high returns, but furnishing very little or no disclosure of the risks, high commissions, and other fees and hidden charges.  With investors eager to recoup losses from the recent market downturn, financial fraudsters have an even larger pool of potential victims.  Scammers have also invented new ways to hook the unwary.

Though new investment scams are invented every day, they tend to fall into five categories.


    1. Pyramid schemes,


    1. Ponzi schemes,


    1. Pump and dump,


    1. Advance fee fraud, and


    1. Offshore scams.


FINRA's podcast describes each of the five kinds of financial scams, and gives some red flags and warning signs investors can look for like:



    • Guaranteed performance or returns,





    • Unusually steady, or remarkably positive returns, regardless of market conditions,





    • Unregistered products,





    • A highly complex method of generating return that cannot be explained or revealed,





    • Missing or inconsistent documentation,





    • Unauthorized trades,





    • Missing statements or trading reports,





    • Lack of an independent or unaffiliated custodian, and





    • Pressure to "act now."


Investors are also encouraged to ask questions about the person pitching the investment, the nature and regulation of the securities they are pitching, and confirm the answers they get with FINRA and SEC resources.

This and other FINRA Investor Podcasts are available at: