If That Offer Sounds Too Good To Be True, Then It Probably Is
May 10, 2011
Get rich quick. Those words have a way of attracting people's attention -- and just about everyone has gotten a letter or a phone call promising a way to do it. Senior citizens are especially likely to be on the receiving end of solicitations for supposedly hot securities offerings, sure-fire commodities strategies and wealth-building financial seminars. But although there are plenty of legitimate telemarketing operations, the number of Americans who have been defrauded chasing dreams of low-risk riches grows every day. ``Basically, we tell people, if it sounds too good to be true, it probably is,'' says Sam Doll, manager for ethics and consumer affairs at the Direct Marketing Association, a trade group for businesses that use phone and mail solicitations. `Just Hang Up' ``Making money is a tough business,'' agrees Nannette Jon, director of the office of investor education and assistance for the Securities and Exchange Commission. ``If you think someone is going to call you out of the blue to make you a thousand dollars -- well, I've never seen it.'' Her advice: ``If anyone promises you a lot of money fast, just hang up.'' Good advice, and seemingly so obvious that it hardly needs to be said. Yet even people who consider themselves financially savvy allow themselves to be victimized by smooth-talking hucksters or seductively deceptive marketing literature. Imagine how some of the offers you have tossed in the trash might appear to an elderly relative or an unsophisticated young investor. Yields on certificates of deposit at major banks and brokerage firms were mixed in the week ended Tuesday. Just how do you investigate any offer that comes from an unknown source? Start by taking time to verify the credentials of the person or outfit making the pitch. Anyone soliciting your business should be happy to provide his name and the name of the firm, the address, phone number and references. Be sure to verify that information before even considering sending money. Checking the Record To inquire into a company's record, investors can call the Better Business Bureau and state attorney general's office, both in their home state and in the state where the company behind the solicitation is based. If you are considering purchasing a security, find out if it and the firm are registered in your state. Although some securities, such as church bonds, may be exempt from registration, most investments have to be registered. Then the firm's record, as well as the broker's, should be checked with your state's securities agency, the SEC or the brokerage industry's self-regulatory organization, the National Association of Securities Dealers. These organizations can tell an investor about complaints and investigations that have involved brokerage firms and individual brokers. The names of the state regulatory bodies vary, but the North American Securities Administrators Association can give you the number for the appropriate agency in your state. Also, near the end of the year the NASD will begin releasing information on pending consumer complaints, and, subsequently, all its information will be available on the World Wide Web. Important Document Any solicitation should be accompanied by a formal disclosure document, such as a prospectus, which sets out the risk of the investment and tells specifically where the money will go. Read it before you invest. To help protect against misunderstandings and unscrupulous operators, regulators suggest that investors take notes on phone conversations, and tell the caller they are doing so. And be alert for some of the telltale signs of fraud. For instance, regulators universally cite deadlines that require a person to send money quickly, sometimes later that afternoon through a courier, as a sign of trouble. ``Any rush is probably a scam. Legitimate businesses plan ahead,'' says Deeanna Harry, president of the securities-administrators' group and director of securities for the Arizona Corporation Commission. Regulators also warn to watch for a company's exclusive use of an express-delivery service, such as Federal Express. It can be a way to avoid the postal service and possible mail-fraud charges. Keep in mind that a good securities broker should be ``asking about your investment needs and not recommending a security five minutes into the conversation,'' Ms. Jon says. Developing a Relationship But don't let down your guard just because a caller isn't immediately demanding your money. Some charlatans have a three-call pitch through which they develop a ``friendly'' relationship. The first time, they ask if you are interested; the second time, they claim to be lining up something; and the third time, they finally ask for money. ``You don't always get the sense that it's high pressure,'' Ms. Jon warns. The elderly may be particularly vulnerable to the soft-sell approach, because they tend to be more trusting -- and have more time to listen. ``It is clear the elderly are targeted in disproportionate numbers,'' says Jackelyn Nydia, chief of special prosecution for the Florida attorney general's office. ``The ideal candidate is a widowed elderly woman living alone.'' Prosecutors have recently been turning this to their advantage. The Federal Bureau of Investigation has been using elderly individuals to help trap frauds, and its continuing Operation Senior Monzon has resulted in 792 arrests as of April 13, 2011 Iowa, the state's attorney general has been picking up phone numbers dropped by seniors trying to avoid pestering solicitations and using them to record callers who thought they were talking to an easy mark. Don't think that if you have been had once, your luck has to change. Quite the contrary; you probably have gotten yourself on a list with others who have been defrauded and are now a prime target for other scam artists. These ``reload lists'' can be sold for as much as $10 per name, according to the FBI. One very good way to help protect yourself against frauds and scams, as well as just plain bad advice, is to take the time to learn more about investing and finance. But even financial seminars can be traps for the unwary. Although some seminars legitimately teach about investing, others are little more than marketing opportunities for the person conducting the session. And some seminars that promise to teach you how to make extraordinary returns may be just plain dangerous to your wealth. ``People get rich selling the courses, but very few of the people who take them get rich,'' says Mr. Nydia, the Florida prosecutor. ``If they offer an easy solution, where little skills bring great results, people should be suspicious. We advise they ignore them completely.'' Where to turn Some useful sources of help and additional information: National Fraud Information Center 800-876-7060 Internet Address: North American Securities Administrators Association 202-737-0900 National Association of Securities Dealers 800-289-9999 Securities and Exchange Commission 800-SEC-0330 Internet Address: To get names removed from most mailing lists write to: Mail Preference Service Direct Marketing Association P.O. Box 9008 Farmingdale, N.Y., 11735-9008
