How to Spot Investment Fraud

Today criminals have many ways to reach ordinary people (robocalls, email, TV, social media) and convince them to hand over their money. And with investment fraud complaints fairly evenly spread among people ages 30 to 60-plus, according to the 2023 FBI figures, anyone of any age can be exploited by phony investment schemes.

Common scam tactics

Free investment seminars, which often include a free lunch. The U.S. Securities and Exchange Commission (SEC) says scammers often figure that if they do you a small favor, you’ll feel obligated to invest.

Big promises. Con artists like to dangle the prospect of fabulous wealth to distract you from realizing the whole thing is a scam.

Slick presentation. Don’t judge an investment opportunity by a company’s attractive, professional-looking website. These days, crooks can easily create a convincing online facade.

Impersonation. Scammers may pose as representatives of financial associations and regulatory agencies to create a false sense of security about an investment and secure an advance fee. In 2024, the SEC warned consumers that scammers were using their Form 4 filing to create the impression that their emails were coming from the SEC.

Scammers have also impersonated executives from the Financial Industry Regulatory Authority (FINRA), a nongovernmental group that watches over U.S. broker-dealers. The organization says its officers and employees would never ask investors for money.

Red flags

High pressure. A caller who pressures you to send money right away to take advantage of a supposedly once-in-a-lifetime opportunity.

Extravagant claims. A caller who uses phrases such as “incredible gains,” “breakout stock pick” or “huge upside and almost no risk!” The SEC says such claims suggest high risk and possible fraud.

International investments. Recommendations of foreign or “offshore” investments from someone you don’t already know and trust. Once your money is in another country, the SEC cautions, it’s more difficult to keep watch over it.

“Inside” information. Don’t jump on inside information posted to social media, chat rooms or forums promoting shares of a company that are certain to go up. It could be a “pump-and-dump” — a ploy to drive up the price artificially, enabling scammers to sell their shares for a big profit before the stock crashes and the remaining investors take a loss.

How to be a smart consumer

Hang up. FINRA recommends rehearsing some stock lines to cut short a caller’s high-pressure pitch, such as, “I’m sorry, I’m not interested. Thank you.”

Ask questions before you make any investment, including:

• Is the financial product registered with the SEC or state securities agencies?
• What are the fees?
• How does the investment company make money?
• What factors could affect the value of the investment?

Do your homework. If you’re considering investing in a publicly traded company, look up information about its finances and operations in the SEC’s EDGAR database. Don’t make investment decisions based on TV commercials, phone calls or email solicitations.

Consult trusted advisers. If you have a lawyer or a financial adviser, have a conversation with them about what you’re considering.

Know who’s handling your investment. Do a background search in FINRA’s BrokerCheck, an online database.

If you’ve been targeted

File complaints with FINRA and the SEC as well as your state or provincial securities regulator.

Report scams involving precious metals or commodities fraud to the Commodities Futures Trading Commission.

Report fraud to the FTC and the FBI .

More resources

• The SEC also issues scam alerts, which you can find on its website’s Investor Alerts and Investor Bulletins.
• FINRA has a Securities Helpline for Seniors (844-574-3577).
• Register for the FTC’s National Do Not Call Registry online or by calling 888-382-1222 to avoid cold calls.
• The North American Securities Administrators Association website has an investor education section that includes information on how to recognize fraud.