Each year, the North American Securities Administrators Association, or NASAA, releases a list of the top threats facing investors and business owners. Below are some of the more popular threats. The full list can be found here.
Private Offerings
•An exemption in federal securities law allows private placements to be sold to investors without registration. This type of investment can’t easily be sold or exchanged for cash without losing much of its value. Private offerings have little regulatory oversight and carry a high risk.
Real Estate Investment Schemes
•Despite an improving housing market, schemes related to the development, purchase, renovation and flipping of distressed properties remain popular. A recent NASAA survey found real estate investments were the second-most common product leading to investment fraud investigations by state regulators.
Ponzi Schemes
•Everyone wants a big return on their investments, which is why so many people still fall victim to Ponzi schemes. The schemes promise unbelievably high rates of return. They gain momentum because initial investors are paid a substantial return in hopes they will spread the word and attract new investors. Just remember that high returns mean high risk.
Affinity Fraud
•This type of fraud preys on the trust of members of a targeted group, organization or community by exploiting similarities of the members. Affinity fraudsters target religious and ethnic groups, the elderly, recent immigrants and business associates. Members of the group often find it hard to believe that “one of their own” could be scamming them and victims are hesitant to pursue legal action against someone they know.
Oil and Gas Drilling Programs
•Oil and gas drilling investments are appealing alternatives for investors who are frustrated with stock market volatility or skeptical of Wall Street. They involve a high degree of risk, so they’re only suitable for investors who can bear a substantial loss.