The Investment Securities section of the website of the North Carolina Secretary of State contains a great deal of educational and other information for investors, including how to file a complaint. One piece provided the Securities Division isFive Things You Need to Know to Avoid Investment Fraud:
1. Know Yourself and Your Investing Goals
You should know your investing objectives and your level of investing knowledge. Ask yourself: What can I afford to lose? What is my risk tolerance? Do I need external guidance to help me invest?
2. Know Who You Are Dealing With
You should know if the person offering you the investment opportunity is registered to sell investments, what their background is, how they are paid, what kinds of products they offer, who their other clients are and what level of service you can expect.
3. Know What You Are Investing In
For example, is the purchase a security? Ask questions, take notes, and get a second opinion from a registered adviser. Never sign a document before reading it carefully, and don’t be drawn in by appearances or smooth talk. Remember most fraudulent investments are very well thought out and appear professional in their presentation.
4. Know Who To Call For Help
The North Carolina Securities Division (1-800-688-4507) can provide verification of the registration of the securities seller, investment adviser and the security itself. Other information, such as complaint history, is also available.
5. Know the Red Flags Which Could Signal Fraud
- Promises of high returns with little or no risk, or guarantees: All investments carry risk. Usually, the higher the expected returns, the higher the level of risk. Pressure to "invest immediately or miss the opportunity": Don’t be pulled in! This tactic is used to pressure you into handing over your money without doing your homework or asking for independent advice.
- Offshore investment – tax free: Taxes can sometimes be deferred, but they can’t be avoided. This tactic is used to get investors to send the money offshore where it is difficult, if not impossible, to get back.
- Great investment opportunity – "your friends can’t be wrong": Yes, they can. Many investment fraud victims were introduced to the fraud by unsuspecting family, friends or co-workers.
- Psychological tactics: Sellers who play on your fear (i.e. insufficient income to keep your home or buy your medicine), greed (to live the good life or leave money to your kids?"), or insecurities (not wanting to appear foolish or incompetent) are common tools used by con artists.
- Inside information: First you have no way of knowing that the information is true. But second, trading on inside information is illegal.
You can also talk with your CPA or attorney, who should be able to provide guidance.