State Investors Warned of Common Scams

6 years 5 months 3 weeks ago Wednesday, June 20 2012 Jun 20, 2012 Wednesday, June 20, 2012 5:47:00 PM CDT June 20, 2012 in News
By: Scott Malone
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COLUMBIA - The Missouri Secretary of State's office is warning investors to look out for several common scams and threats to their money. The Securities Division of the Secretary of State's office released its list of the top threats to Missouri investors for this year.

The Secretary of State's office has returned more than $10 billion to investors from fraudulent investments dating back to 2004. The office releases the warnings each year, and has audited 155 different cases in the last 32 months.

The report said the best defenses against investment scams are knowing what to look for, being skeptical about online sales pitches, and checking in on any companies you're skeptical about before investing in them.

The division said in the report that online pitches are increasing in number thanks to the growth of online social networking, which acts as a vehicle for scam artists. Online investment opportunities offered by start-up companies with little to no history may enclose very few details.

Unlicensed salesmen are also sources of potential scams. According to the report, salesmen licensed only to sell life insurance sometimes will also pitch investment opportunities. That practice is illegal in Missouri, as giving advice about buying or selling stocks, mutual funds or other securities requires a specific license.

The division's report said promoters pushing a new business idea without sufficient documentation is another red flag. The report recommends investors ask for financial statements, a thorough business plan, owner background and other traditional documents about a startup business.

The report admits that new business investments are inherently risky, but all promises of returns, guarantees and collateral should be thoroughly investigated; especially if the return sounds too good to be true.

Those pie in the sky promises often appear as guarantees of gold, oil or gas futures, and other commodities. The report urges investors to keep in mind that no investments are guaranteed, and all markets fluctuate.

The report also warns that some brokers are advising investors to drop out of traditional investments, and invest with a broker offering a special deal or "limited time opportunity." The division said it has recently seen these special deals turn out to be Ponzi schemes; even when those brokers work for an otherwise credible company.

For investors looking to help keep their money, the division has three recommendations. If considering a new investment or broker, a call to the Investor Protection Hotline (1-800-721-7996) can help you check up on the credibility of the broker or investment opportunity.

The report also tells investors to get complete documents explaining all the costs, fees and charges involved in the investment beforehand. If real estate is involved, make sure to ask for proof of ownership.

The final recommendation is for you to understand your goals when investing. That understanding includes knowing when you will need to access your money, how much risk in an investment you can handle, and what taxes or fees you will have to pay.

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