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Securities Division

Investor Education - Avoiding Investment Fraud

 

  1. Beware of high pressure tactics. Say no to any person who presses you to make an immediate investment decision. You need time to do your own research. Any ethical salesperson will understand this. Don't buy securities offered in unsolicited telephone calls or through cold calls. Ask for information in writing.
  2. Exercise particular caution if you lack financial experience. It's easy to feel intimidated and overwhelmed by complicated financial jargon, but resist the impulse to turn it over to the expert. Ask lots of questions and insist that the salesperson explain the investment in everyday language until you understand it. Protect yourself by educating yourself.
  3. Keep in mind that good manners don't indicate personal integrity. Con artists are generally extremely polite, knowing that many of us equate courtesy with personal integrity. Swindlers are also counting on your good manners to keep you from cutting them off. Be skeptical of guarantees or promises of quick profits. Don't let your good manners land you in trouble; simply hang up if you don't like the conversation.
  4. Watch out for salespeople who prey on your fears.
    It is common for swindlers to pitch their schemes as a way to eliminate your financial fears for the future. Be aware that fear and greed can cloud your good judgment. A guarantee of massive profits could be a danger signal. Remember: the higher the expected return, the higher the risk involved.
  5. Exercise particular caution if you are an older citizen.
    The elderly, and particularly older women, are a frequent target of scam artists. Always seek the advice of a neutral party before investing. This could be other family members, friends, your banker, or CPA, AARP, or other organizations and professionals who could help you.
  6. Monitor your investments and ask tough questions.
    Insist on regular written reports and look for signs of excessive or unauthorized trading of your account. Constant vigilance is a vital part of being an investor. If you suspect that something is amiss and you get unsatisfactory explanations, you may contact the Securities Division and file a complaint.
  7. Look out for trouble when retrieving your principal or cashing out profits. If any person with whom you have invested stalls when you want to withdraw your money, you may have uncovered someone who is cheating you. If you are not investing in a fixed-term security, such as a bond or limited partnership, you should be able to receive your funds within a few days.
  8. Report investment fraud or abuse immediately, despite any embarrassment or fear you may feel. If you suspect you have been victimized, contact the Securities Division immediately. The sooner you report fraud, the better your chances of recovering some or all of your investments.
  9. Beware of reload scams. Investment losses often create a panic, and con artists know this. They have developed schemes to take a second bite out of investors. To recoup their losses, victims sometimes invest in another scheme (a reload) in which the con artist promises to make good the original loss and may offer new, higher returns. Often, the result is only more losses.
  10. Check out the person touting investment deals.
    Tennessee law requires most securities to be registered or to have filed notice, in the case of federally covered securities. Also, the persons selling them are usually required to be registered at both the federal and state levels. Check on the registration requirements and registration status of any offerings, firms, and or individuals with the Tennessee Securities Division before you invest by calling toll free at 800-863-9117.

NOTE: Registration does not mean that the state endorses or recommends an investment or the persons selling them.

 

Protecting Tennessee Investors

The Tennessee Securities Division protects Tennessee investors by: (1) requiring registration for agents, broker-dealers, and investment advisers, (2) requiring registration for certain securities, (3) enforcing the state statutes and rules, and (4) educating the public.

 

However, there is no way that investigators or prosecutors can protect you one hundred percent of the time. Our files are filled with tragic examples of individuals who have been victimized, either because of fraud or because they failed to understand the nature of an investment. We believe education is the key to a healthier and safer investment climate in Tennessee.

 

We hope you find the tips on this page helpful and urge you to share this information with your family, neighbors, and friends. You may also be interested in our videotape entitled "What Every Investor Needs to Know." The tape focuses on preventing and resolving problems with investment professionals.

 

You can receive this tape free of charge by writing to the Tennessee Securities Division, 500 James Robertson Parkway, Nashville, TN 37243-0575.