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Your Financial Future

Investor, Protect Thyself

A new way for consumers to avoid Bernie Madoff-like schemes.

The Securities and Exchange Commission has drawn a lot of criticism in the past few years for not fulfilling its mandate to regulate markets and protect investors, most dramatically by its failure to take action against Bernard Madoff’s gigantic Ponzi scheme. But the federal agency has been spending time and resources on initiatives designed to help restore investor confidence.

One of the best of these is a new website focusing on investor education and protection. Easy to remember and easy to find, Investor.gov is designed to put as many tools as possible in one spot.

Investor.gov has three main sections:

  • “Getting Started” includes such basics as a glossary of mutual fund terms and a tutorial on how mutual funds work, as well as an extensive list of calculators and tools.
  • “Protect Your Money” provides a valuable list of questions to ask about different types of investments and the people who sell them. It also has a brief section on the original Ponzi scheme (though with no updated examples such as Madoff’s).
  • “For Seniors” includes, among other things, a “seniors care package” with advice about how to find a reputable financial adviser and about evaluating your retirement options.

 

One-stop shopping

What Investor.gov also has done is to consolidate information from other sources and make it available for one-stop shopping along with the SEC tips. For instance, there is a presentation on outsmarting investment fraud produced by SaveAndInvest.org, AARP and the Financial Industry Regulatory Authority (FINRA).

The information, used in workshops to train investors to recognize and avoid fraudulent pitches, includes illustrations of the type of pitches that should make you wary. For instance, “We have had a run on this stock like you wouldn’t believe—we only have 2,500 shares left out of an initial supply of 300,000.”

The site also features Moneytopia, the “city where money never sleeps.” It’s a game that allows you to practice managing money with imaginary stakes. I’m not much of a gamer, but it looked like a reasonably useful way to kill time when you’re sitting at your computer.

Information in Spanish

Also, in keeping with the SEC’s efforts to provide more information in Spanish, there’s a Spanish-language section, although the investor alerts, such as the one on the state of California’s IOUs, have not been translated.

“We thought that people were having a hard time finding the investor information that they needed,” says Lori Schock, director of the SEC’s Office of Investor Education and Advocacy. Schock’s office is where you go if you have questions or complaints—she says every year the SEC receives “tens of thousands.”

The number is 1-800-SEC-0330 (1-800-732-0330). You can also get in touch online or by mail.

Guess who’s at risk

Featuring information for older investors prominently on the site was important, she says, because “fraudsters go where the money is, and seniors have the money.”

SEC Chairman Mary L. Schapiro has made preventing fraud one of her top goals. In addition to the new website, the SEC has stepped up enforcement actions and created a new Division of Risk, Strategy and Financial Innovation to help regulators keep up with new products and new markets.

Schapiro says research shows that typical victims of investment scams are not who you might expect—people who seem financially inexperienced and easily duped. They tend to be married men with college educations and high incomes. In addition, they are likely to be college graduates, to score higher in financial literacy and to rely on their own experience and knowledge when making investment decisions.

If that’s you, you may want to spend some time at Investor.gov.

Martha M. Hamilton writes a regular column for AARP Bulletin Today on retirement and financial issues.

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