Outsmart Investment Fraud

Beginning this summer and fall, AARP Vermont will co-lead a social awareness campaign in collaboration with the FINRA Foundation and other VT organizations to educate Vermont's senior investors on the dangers of investor fraud.

Older Vermonters are frequently targeted by con artists and this program arms residents with ways to protect themselves from being drawn in. In addition to advertising and other media efforts, the campaign will conduct workshops across the state to reach residents with information on avoiding investment fraud.

The campaign focuses on the following:

• Recognizing that older Vermonters are vulnerable to financial fraud
• Identifying persuasion techniques
• Reducing risky behaviors by asking questions and checking information

Common tactics include:

"Phantom Riches"—dangling the prospect of wealth, enticing you with something you want but can't have. "These gas wells are guaranteed to produce $6,800 a month in income."

"Source Credibility"—trying to build credibility by claiming to be with a reputable firm, or to have a special credential or experience. "Believe me, as a senior vice president of XYZ Firm, I would never sell an investment that doesn't produce."

"Social Consensus"—leading you to believe that other savvy investors have already invested. "This is how ___got his start. I know it's a lot of money, but I'm in—and so is my mom and half of her church—and it's worth every dime."

"Reciprocity"—offering to do a small favor for you in return for a big favor. "I'll give you a break on my commission if you buy now—half off."

"Scarcity"—creating a false sense of urgency by claiming limited supply. "There are only two units left, so I'd sign today if I were you."


Here are three key strategies to help distinguish good offers from bad ones:

End the conversation

Practice saying "No." Simply tell the person, "I Am sorry, I am not interested. Thank you." Or tell anyone who pressures you, "I never make investing decisions without first consulting my ____. I will contact you if I am still interested." Fill in the blank with whomever you choose—your spouse, child, investment professional, attorney or accountant. Knowing your exit strategy in advance makes it easier to leave the conversation, even if the pressure starts rising.

Turn the tables and ask questions

A legitimate investment professional must be properly licensed, and his or her firm must be registered with the Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC) or a state securities regulator—depending on the type of business the firm conducts.

In addition, with very few exceptions, companies must register their securities with the SEC before they can sell shares to the public. So, before you give out information about yourself:

Ask:

• Are you and your firm registered with FINRA?
• Are you registered with the SEC?
• Are you registered with a state securities regulator? Which one(s)?
• Is this investment registered with the SEC or my state securities regulator?

Check:

• Verify the answers by checking the seller's background. Visit SaveAndInvest.org or call (888) 295-7422.