How Older Californians Can Avoid
Investment Fraud and Abuse
Unscrupulous stockbrokers and financial planners who engage
in abusive practices often seek out the elderly. The
California Department of Corporations regulates firms and
individuals in the securities and investments industry,
including stockbrokers, investment advisers and financial
planners and can provide information about licensed firms and
their registered representatives.
A critical step in wise investing for any individual
investor is taking the time to check the backgrounds of
potential brokers and advisers prior to entering into
financial relationships with them. Information or complaint
forms may be obtained by calling 1-866-ASK-CORP
(1-866-275-2677) or, by accessing the Department of
Corporations Web site at http://www.corp.ca.gov/.
In the meanwhile, costly mistakes can be avoided by
following the ten self-defense tips:
- Don't be a "courtesy victim". Con artists don't
hesitate to take advantage of people with good manners. A
stranger who calls either on the telephone or at your door
should be regarded with the utmost caution. There are legal
restrictions on "cold calls" and you are under no obligation
to say "yes" to a stranger asking for your money. In these
circumstances, it is not impolite to simply say that you are
not interested.
- Check out strangers touting "strange" deals.
Trusting strangers is a mistake that all too many older
Americans make when it comes to personal finances. Say "no"
to any investment professional or con artist who presses you
to make an immediate decision, giving you no opportunity to
check out the salesperson, firm, and the investment
opportunity itself. The California Department of
Corporations can help you with information on firms and
individuals in the securities and investments industries,
including stockbrokers, investment advisers and financial
planners.
- Always stay in charge of your money. Beware of
any financial professional who suggests putting your money
into something you don't understand, or who promises to
"take care of everything for you. Constant vigilance is a
necessary part of being a successful investor.
- Never judge a person's integrity by how he or she
"sounds." Successful con artists sound extremely
professional and combine professional-sounding sales pitches
with extremely polite manners. Don't be fooled. Good manners
and a slick sales pitch have nothing to do with real
integrity and have no bearing on the soundness of an
investment opportunity.
- Watch out for salespeople who prey on your fears.
Con artists take advantage of the fears of many older
Californians that they will outlive their savings or that
all their financial resources will disappear as a result of
a catastrophe. Fear and greed can cloud good judgment to the
detriment of a sound financial decision. If the investment
doesn't make sense, or if it seems to good to be true, it
may be a scam.
- Older women with little investment experience should
exercise particular caution. A con artist's ideal victim
is the "elderly widow." Elderly women on their own with
little investment experience should always seek the advice
of family members or a disinterested professional before
deciding what to do with their savings.
- Monitor your investments and ask tough questions.
Many older Californians who trust unscrupulous investment
professionals to make initial financial decisions compound
the error by failing to keep an eye on the progress of the
investment. Insist on regular written and oral reports. Look
for signs of excessive or unauthorized trading of securities
and report any inconsistencies to the Department of
Corporations.
- Look for trouble if retrieving your principal or
cashing out profits is difficult. A stockbroker or other
investment adviser, who fails to respond to a request for a
refund of the initial principle or profits from an
investment, may be con artist. Unscrupulous investment
promoters pocket the funds of their victims and often go to
great lengths to explain why investments or profits are not
readily accessible. If the investment is not a fixed term,
such as a bond, a request for a refund of principle or
profits should be available to the investor within a
reasonable amount of time.
- Don't let embarrassment or fear keep you from
reporting investment fraud or abuse. Con artists
recognize the fears of many older investors and count on
these fears to keep them in business. If there is a concern
that you have been victim of investment fraud, report such
fears immediately to the Department
of Corporations' office in your area or call
1-866-ASK-CORP (1-866-275-2677).
- Beware of "reload" scams. Older
Californians who have a finite amount of money, which is
unlikely to be replenished in the event of fraud or abuse,
will sometimes go along with another scheme, if faced with a
loss of funds. These so-called "second bite" scams defraud
investors who have already been victimized. Be very
suspicious of promises to "make good" on original funds that
were lost, with an even greater return than was originally
promised.
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