10 Efficient Tips to Help You Avoid Illicit Investment Schemes
An increasingly larger number of individuals around the world had become victims of "boiler room" operations and other forms of illegal investment schemes. The following 10 tips are designed to provide a complete understanding of how to avoid getting caught in this type of fraudulent situations.
Top 5 Red Flags and General Indicators1. The investment "professional" who just cold-called you comes across as "the best in the business" and at first glance, his "one in a lifetime opportunity" looks even better.
The Truth: This is the first and most obvious red flag to consider because if it sounds too good to be true, then most probably it is too good to be true. Do your due diligence by thoroughly checking the professional and social credentials of those who contact you. Check company physical addresses, related websites for registrar details which could provide insight regarding the dates of registration of the related domain names and the hosting packages (established brokerage firms with legitimate track records do not use domain names and hosting packages purchased anonymously for short periods of time, e.g. 1 year only). Request and check corporate registration details with the appropriate authorities. Check individual broker registration details with FINRA. Ask for such details right from the beginning as real companies will not avoid providing proof of their legitimacy.
2. The "opportunity" is only available for a very limited period of time and you are getting pressured to buy into it "before you end up watching others around you making that percentage ROI you always dreamed of".
The Truth: Time is of the essence in the financial world but a broker who pushes your every button to get you involved in some investment vehicle ASAP is most likely a con artist trying to get your interest levels pumped up so you will end up making emotion-based decisions, not logic-based ones.
3. Their product presentation is based on evasiveness/vagueness of details and the emphasis is placed on "gains, profits, future wealth, building relationships with the firm, etc."
The Truth: Real brokerage firms use market research and risk assessment specialists in order to advance feasible financial projections and do not beat around the bush when it comes to detailing how and why those "huge" profits will become part of your portfolio with them. ASK QUESTIONS AND DEMAND WRITTEN PROOF OF THEIR FINANCIAL CLAIMS.
4. Your "broker extraordinaire" gives you different answers (slightly different or entirely different) to similar questions you may ask in different circumstances.
The Truth: Asking the same questions multiple times should not change the answer you receive every time. If this happens then you need to start looking for discrepancies and inconsistencies until you can safely conclude whether the information received is real or just hype.
5. If they are real then they have clients who can provide confirmation of their "financial prowess".
The Truth: Request to speak with someone who is or has been a client of the firm. Whether they are satisfied or not with the services of the firm, they will provide pertinent information allowing you to understand you are talking to real professionals. If the client seems too happy with the firm, ask to speak with another client. There is no such thing as "100% client satisfaction ratio". If there are only happy clients you speak to, then there is clearly something more than meets the eye going on there.
Top 5 indicators to understanding risks associated with cold-calling "Investment Opportunities"1. Missing and/or Inaccurate or Incomplete Documents.
The Truth: Often, this is a strategy used by perpetrators to ensure that investors will not be able to legally pursue them once the whole sham would be exposed.
2. Highly unjustified payments required for financial vehicles with affixed fees and charges.
The Truth: Exaggerate and unjustified requests for payments can be indicators of possible attempts to cover other financial deficiencies with your money.
3. Intentional absence of appropriate disclosure disguised as "Non-Disclosure Agreement(s)".
The Truth: If the firm contacting you has nothing to hide then they will not be pushing such NDAs onto you as if their deals would not become possible without your complete and utter secrecy. This is an indication that they are trying to shut you up completely from the very beginning.
4. There is no "NEED" for third-party auditors to validate the feasibility of the financial projections provided by the firm.
The Truth: The only way to confirm that the returns are not being made up is to ask if the numbers provided are GIPS compliant (Global Investment Performance Standards). You should ask for the contact details of the auditing entity who assessed and confirmed the feasibility of these projections and if you don't get pertinent answers to your questions then the risk of all of it being made up is extremely high.
5. Loans and Margin Agreements.
The Truth: Whenever you are required to pay a sum of money for an investment and are offered a loan or a margin agreement if you do not have the appropriate amount necessary, the risks are that you are just being mislead into accepting that trade and getting involved in the first place. Usually, investors in this situation end up finding out that they have never "needed" such "assistance" from these firms because the prices had been artificially inflated to cover everything with the investor's funds while deceiving him/her into thinking they would be afterwards indebted to these firms and expose them to the possibility of "paying off" these "debts" keeping investors involved for long periods of time.