Avoid scams

Spotting cons

Investing can be risky enough without worrying about whether your salesperson is out to fleece you or whether you are dealing with an experienced scam artist. You need to know the danger signs to look for. Some are subtle, and some are easier to spot. Always watch for Red-Flags and these signs of a scam artist.

What does a scam artist look like?

  • They look like you and me. They join local groups and organizations and use these bonds to spread their scam.
  • They dress for success.  They look professional and often have impressive offices and addresses so you will think they are legitimate professionals

What do scam artists offer?

  • Investments that are too good to be true such as:
    • guaranteed high returns at no risk
    • an opportunity to get in on the ground floor based on an inside tip
    • tax free offshore investment
    • an opportunity to profit like the experts
  • An offer to assume full responsibility for the investment if you don't get the profits promised, so you don't have to know the details.
  • Temporary friendship - before you invest scam artists are very friendly but  after you invest, contact with them dwindles and stops altogether.

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How do scams work?

  • Scam artists use the trust you have in others to get you to buy into the scam. They get your friends and family to sell you on the idea and then bring you in  to close the deal.
  • Scam artists play on your desires, fears and insecurities  to keep you interested and pressure you into investing in the scam.

For a description of different scams check out the Red-Flags  scam glossary.

How can I avoid scams?

1.  Do a background check on the person selling you the investment and the investment. For example:

2.  Get in touch with your local Better Business Bureau new window and ask if they have any complaints on file for the venture's promoters or principals.

3.  Deal only with registered dealers or advisers.

4.  Obtain written information on the investment product and the business. Look in the prospectus  for this information, including financial data on the company and the risks involved in the investment. Read it carefully or get some professional help to review it with you.

5.  Ask questions if you don't understand anything and walk away if the salesperson refuses to answer any of your questions or gives you unsatisfactory answers.

6.  Go to someone independent whom you can trust such as an attorney or an accountant to review the investment.

7.  Be cautious if the salesperson does not ask you questions about your past investment experience and how much risk you can handle.

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