Protect
Yourself From Investment Fraud!
The Enron company (stock symbol -
ene) "stock" scandal
has been widely reported in the news. The company stock went
from $83 to .25 cents in just one year. According to recent
widely televised news reports one possible reason was accounting
improprieties. The most widely speculated impropriety was
over-reporting of earnings by some officers. While downright
false accounting reports by major companies are rare, and
difficult to detect, you need to protect yourself from these
types of scandals. We ask the following questions and attempt
to answer them here. How do these scandals occur? Who is
most vulnerable to stock scandals? How can investors protect
themselves from this and other types of stock scandals?
Although most investment firms and products are ethical
and legal, investment schemes and frauds do exist within
the securities industry. Con artists are quick to pick up
on the newest hot investment prospects and the latest technology
trends and use them as a basis for fraudulent investment
schemes. Many of those schemes are very enticing and very
difficult to spot. Almost all of them depend on trusting
investors willing to believe the con artist's claim without
question. It may be difficult to identify fraudulent schemes,
but there are some things you can do to avoid becoming a
victim. Here are some pointers.
>Deal only with firms and individuals
you have researched and trust.
>Be skeptical of any investment
opportunity that comes about as a result of an unsolicited
telephone call, Internet
offering or even a television advertisement if the product
cannot be easily researched. Never invest without doing some
research about the opportunity. The Federal Communications
Commission regulates telephone solicitations and automated
calls under the Telephone Consumer Protection Act. Provisions
of that act require a person making calls to identify themselves
and the name of the entity on whose behalf the call is being
made. They must also give you the telephone number where
the person or entity may be contacted. Other provisions require
the entity to place your name on its no call list upon a
written request and prohibit unsolicited calls between 9:00
p.m. and 8:00 a.m. Obtain additional information by contacting
the Federal Communications commission, 1919 M Street NW,
Washington, DC 20554 (202) 632-7553.
>Beware of glowing promises of
high returns. Ask yourself why the promoter is so eager
to share this opportunity with
you, and remember that if it sounds too good to be true,
it probably is.
>Carefully analyze promotions offering
high returns by investing in the latest technology developments.
>Resist the temptation to invest "right now" because "tomorrow
will be too late." Don't be surprised if they follow
that line by "We will have someone there within the
hour to deliver the prospectus and pick up your check."
>Never believe a salesperson when he says, "You
don't have to read the prospectus or contract. That's just
for the lawyers."
>Be extremely careful about giving
out your social security number, credit card or bank account
information.
>Look for audited financial statements
and review them carefully. Be leery of the absence of audited
financial statements
and scrutinize unaudited financial statements carefully because
an expert third party has not attested to their accuracy.
Question any financial statement projections to see if the
expenses and profits appear reasonable.
>Always..always..always….read
and understand the legally required offering documents;
ask questions and insist
on reasonable answers. Seek advice from a knowledgeable friend
or consult with your financial advisor, and invest only after
you have satisfied yourself that the risk in this particular
investment agrees with your financial objectives.
>Save all records of transactions
and correspondence. Never part with original documents.
>Take notes of your conversations
with your broker-dealer agent or investment advisor representative.
Include the dates
and times.
>When considering equity securities
prices below five dollars per share, unit, etc. (penny
stocks) be sure you
receive, read and understand the lawfully required consumer
protection information prior to conducting any business.
>Slick promoters know how to make
fraudulent investments sound legitimate and inspire your
confidence. That is why
they succeed so often. If you feel you have been victimized,
report the matter to your state corporation commission, division
of securities and retail franchising. On the national level
you can contact the Securities and Exchange Commission (SEC),
or the National Association of Securities Dealers, inc. (NASD),
via the websites. You might also want to contact an attorney
to determine your rights or file an arbitration claim. Your
prompt complaint may keep others from being defrauded and
increase your chance of getting your money back.
Lois Center-Shabazz is the founder of MsFinancialSavvy.com
and author of the 3-time award-winning personal finance
book, Let's Get Financial Savvy! ISBN #0971979502.
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