Q: A broker called me yesterday offering what sounds like a good deal, but with so many scams going on how can I know this one is real?
A: Before you invest your earnings, it is important to check for scams and verify the credibility of the investment firm. Start with asking questions, researching the company, reach out to local investment firms and advisers, and talk to other investors. It is essential to take precaution with all investment opportunities.
Studies show that investment scams are on the rise over the past decade. Baby boomers in particularly are more vulnerable to such schemes, as many are now managing their own retirement account. In 2010, state securities regulators initiated more than 1,200 enforcement actions, including criminal complaints and cease-and-desist orders, involving investors ages 50 or older, according to the North American Securities Administrators Association. That was more than double the 506 cases in 2009.
FINRA Investor Education Foundation, specializing in investment fraud, has a plethora of valuable information to help you sort through your next investment making decision. FINRA has provided some key strategies you can use if you are not certain about a specific investment opportunity:
• End the conversation. Practice saying "No." Simply tell the person, "I am sorry, I am not interested. Thanks you." Or tell anyone who pressures you, "I never make investing decisions without first consulting my___. I will contact you if I am still interested." Fill in the blank with whom ever you choose -- your spouse, child, investment professional, attorney or accountant. Knowing your exit strategy in advance makes it easier to leave the conversation, even if the pressure starts rising.
• Turn the tables and ask questions. A legitimate investment professional must be properly licensed, and his or her firm must be registered with the Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC) or a state securities regulator, depending on the type of business the firm conducts.
• Talk to someone first. Be extremely skeptical if the person promoting the deal says, "Don't tell anyone else about this special deal!" A legitimate investment professional won't ask you to keep secrets.
• Increase your knowledge. BBB has joined forces with FINRA to be able to present a screening of "Tricks of the Trade: Outsmarting Investment Fraud" on Tuesday, Oct. 23 at the BBB from 2 p.m. to 3:30 p.m. This documentary helps give tips on outsmarting scammers at their own game and, more importantly, from taking your money. Feel free to bring friends and family. The screening is free, but we ask that you RSVP with us as space is limited. To RSVP, please email firstname.lastname@example.org or call (423) 266-0396. The BBB is located at 508 N. Market Street in Chattanooga.
Get answers to your questions each Friday from Jim Winsett, president and CEO of the Better Business Bureau Inc., which serves Southeast Tennessee and Northwest Georgia. Submit questions to his attention by writing to Business Editor Dave Flessner, Chattanooga Times Free Press, P.O. Box 1447, Chattanooga, TN, 37401-1447, or by e-mailing him at dflessner@ timesfreepress.com.