Seniors Investing: Fraud Among Friends
Posted on June 29, 2012 by bob in Financial
Are friendships, fellowships, and your desire to trust leading you down a path of financial exploitation? Affinity fraud is an investment scam that preys upon members of identifiable groups, which may include churches, the elderly, ethnic groups, and professional groups. Affinity fraud exploits the faith, love, trust, and friendships that exist in groups of people who have common interests. Here are some examples of affinity fraud or financial exploitation possibilities in Alabama:
A) A state employee retires and desires to redistribute her nest egg into new financial products. Her husband forbids the wife to check out the person offering to handle their life savings because he has been his golfing buddy for the past ten years. It turns out the product offered was not an investment and the person offering the product was not licensed to sell securities, but was licensed to sell insurance products.
Caution: Check out your golfing, fishing and social club buddies before trusting them with your life savings.
B) A member of your church congregation, who travels from state to state and seems like a fine upstanding man in the church community, is offering investment opportunities in gold or other precious metal commodities. He will take your money, give you a certificate and place your gold in a box in another state for safe keeping. No prospectus is offered. Ventures like this are high risk and may fall out of the ASC oversight to regulate. The U.S. Commodity Futures Trading Commission (CFTC) is an independent agency of the United States government that regulates futures and option markets. But check with the ASC to find out.
Caution: More money has been stolen in the name of God than in any other financial crime.
C) Gas and oil ventures are on the rise! Oil discovery and drilling is back again, like an old time gold rush in the Midwest if you listen to the news. Also, new oil-related technologies like disbursements for completely cleaning up oil spills in the gulf or oceans are being touted. Have friends or business associates offered new and speculative investment opportunities that promise high returns?
Caution: Crooks rip their next scheme right out of the newspaper headlines.
Questions to ask before you invest:
1) Are the seller and the investment offer or financial planner registered in Alabama? Call 1-800-222-1253 to find out.
2) Has the seller given you written information or a prospectus that fully explains the investment?
3) Are claims made about the investment realistic? (Be very wary of guaranteed double digit returns!)
4) Does the investment meet your personal investment goals or objectives?
5) Do you fully understand the investment or financial product offer, the risk, and fees to cash out?
Contact ASC for inquiries regarding securities broker-dealers, agents, investment advisors, and investment advisor representatives, financial planners, the registration status of securities, to report suspected fraud, or obtain consumer information. Upon request ASC provides free videos of actual church scams. Contact the Education and Public Affairs Division at 334-353-4858 or visit the ASC website at www.asc.alabama.gov.
(This article is provided by a generous grant from the Investor Protection Trust, www.investorprotection.org.)
Joseph Borg, Exec. Dir., ASC
Joseph Borg is Director of the Alabama Securities Commission.
