Avoid These Investment Scams

Don't get trapped

Maybe your 401(k) took a hit, or was it your portfolio? Whatever you lost this year, you want it back.

The North American Securities Administration Association, however, warns investors to beware. This week NASAA released its annual list of traps cautious investors should avoid when looking to replenish losses as a result of the financial crisis.

"Knowledge, attention to detail and a healthy sense of skepticism are a triple threat to fight investment fraud," said NASAA President and Texas Securities Commissioner Denise Voigt Crawford.

Among the list of investor scams are private or special deals. This would include investment opportunities or deals passed off as "private" or only for "special" clients. Many state securities regulators have seen increased abuse of fraudulent private offerings made under federal exemptions or not regulated at all.

NASAA also warned about "green schemes." These are opportunities to invest in new, energy-efficient green technologies.

And look out for unsolicited online pitches. Fraudulent investment schemes go beyond e-mail. You'll find scammers now surfacing on Facebook, Twitter, Craigslist and YouTube. It's on social media sites where scammers spread misinformation to artificially inflate the value of stock before selling in what's known as a "pump and dump" scheme. Unsuspecting investors buy the stock in droves, pumping up the price. But when the fraudsters behind the scheme sell their shares at the peak and stop touting the stock, the price plummets and innocent investors lose their money.  Others promise tax-free returns from investments in offshore markets.

Crawford cautions investors to familiarize themselves with the warning signs of investment fraud.

"Investors should do business with licensed brokers and advisers and should report any suspicion of investment fraud to their state or provincial securities regulator," she said.

Click here for the NASAA's complete list.

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