Law Offices of Jerry Carter, P.C. - April 2020



April 2020

DON’T LET YOUR MONEY FALL INTO THE WRONG HANDS 5 Ways to Protect Yourself From Investment Fraud

shows up on your account statements with the brokerage firm.

April is Financial Literacy Month, so I want to take a quick detour from our regularly scheduled “What’s Happening With Jerry” programming to talk to you about something really important: how to protect yourself from investment fraud. Over the course of my career, I’ve handled investment fraud lawsuits for people of all ages and experience levels and companies of all sizes and demographics. My clients run the gamut from retired individuals all the way through multimillion-dollar pension funds. With that in mind, here are my tips for safe investing. Tip No. 1: Recognize that no matter who you are, you’re at risk for investment fraud. Just because you’ve invested successfully before doesn’t mean you aren’t in danger of being scammed. Pay close attention to your investments, no matter what. Tip No. 2: Do your research. If you’ve been approached by an investor, always look into their background and research before you do business with them. A great resource for this is BrokerCheck. com. There, you can look up an individual to check their disciplinary history and see if they’re licensed. It is possible for investment professionals to have their histories expunged from the record, but is still a great place to start. It’s also vital to do your research on any investment product your investment professional suggests, particularly if it’s not recommended by their brokerage firm. Sometimes, brokers will recommend exploitative, trend-riding products that pay them on commission but aren’t registered or safe. This is a tactic called “selling away.” To avoid these shady products, make sure any product you invest with includes a prospectus and

Tip No. 3: Don’t take friends of friends on faith. It can be tempting to skip Tip No. 2 if you feel like you already know an investment promoter because they’re a friend of a friend or they go to your church. However, doing so would be a big mistake. In my experience, one of the quickest ways fraud spreads is through affinity groups like churches, professional organizations, and social clubs. That’s because effective promoters find new clients through referrals, which are often given before the referrer realizes they’ve been scammed. To protect yourself from this, go back to Tip No. 2. investment, don’t take their words at face value. This is particularly important if the call comes from out of state. This tactic is popular with people promoting “pump- and-dump schemes,” a type of securities fraud where promoters trick people into investing in a particular stock then rapidly devalue that stock by “dumping” their shares. As the age-old saying goes, “If something sounds too good to be true, it probably is.” and time the market. Timing the market is fraught with difficulty. A better, safer approach is to diversify your investments across a variety of categories and also within those categories. That way, you’ll avoid putting all your eggs in one basket and decrease your risk of fraud. Mutual funds are a great option for this, and a quick trip to the library can fill you in on other reputable alternatives. Tip No. 4: Be suspicious of phone calls. If someone calls you to promote an Tip No. 5: Be wary of people who promote their ability to pick stocks

Bonus Tip: The first time you’re surprised, call a lawyer. If you’re dealing with a shady investment promoter or program, something surprising will happen sooner or later — likely before you miss a payment. The surprise could be as simple as something not showing up on your bank statement or failing to get documentation for an investment you’ve paid for. Regardless of what it is, don’t shrug off the weirdness. Instead, call a lawyer and have them look into the investment right away. If you wait for a second surprise, you’ll start to get desensitized. Soon it will be hard to tell good investment tactics from bad, and legal red tape will begin to limit your ability to fight back. If you’ve already been surprised once, my team and I can help. You can reach us at or by calling 775.448.6070.


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