Julie Jason: Beware of scams.
The North American Securities Administrators Association wants investors to be aware that fraudulent investment schemes are surging during the COVID-19 crisis.
“In these extraordinary times the health and welfare of all must be our foremost concern, and that includes our financial health. Our primary focus remains on the protection of retail investors,” said Christopher W. Gerold, president of NASAA and chief of the New Jersey Bureau of Securities, in a recent news release.
The global pandemic has increased threats to investors related to COVID-19, including “fraudulent offerings, investment frauds and unregistered regulated activities,” explained Gerold.
“Just as state and provincial securities led the way in protecting investors from fraudulent cryptocurrency-based schemes in 2018, we stand ready to protect investors from COVID-19-related schemes,” said Gerold.
How do you know if you might be susceptible to being taken advantage of by a fraudster?
Over my many years in the financial services industry, first as a lawyer, then as a money manager, I can tell you that being a skeptic is the key characteristic that lowers the possibility of being defrauded.
If you would like to get a sense of your own susceptibility to being scammed, let me tell you about something that can guide you. Developed by NASAA and the Canadian Securities Administrators, there is a 12-question quiz to help individuals avoid becoming victims. The quiz, which was developed a while ago, is still relevant today. You can find it here: survey monkey.com/r/2020 FraudQuiz.
The quiz was designed to test investors’ knowledge of scams and frauds, and also to increase financial literacy.
Some of the questions relate to the person who is making the recommendation.
How would you answer this question? “A fellow book club member tells you about an investment opportunity that has earned returns of 20 percent during the past year. Your investments have been performing poorly and you’re interested in earning higher returns. This person is your friend and you trust them. What should you do?”
Many people would go along with the friend’s recommendation. Would you?
Here is NASAA’s answer: “You should never make an investment based simply on word-of-mouth, even if the recommendation comes from a family member, friend or acquaintance. Fraudulent schemes are frequently perpetuated this way. The promise of quick, high returns should also alert you to a possible scam. As a general rule, risk and return are proportional; the higher the return, the higher the risk. Even if a company looks and sounds legitimate, you should always check it out. Therefore, ask for more information about the investment and call your securities regulator to see if the investment has been registered or exempted for sale.”
To read more about avoiding fraud, visit NASAA’s Fraud Center at nasaa.org/investoreducation/fraud-center/.
We’ll discuss ways to identify potential scams and how to protect yourself and your family members from fraud in a future column.
In the meantime, do write to me (readers@juliejason.com) to share any experiences you have had that can help other readers of this column protect themselves.
Also, take a look at a video that I prepared for you on today’s topic, which you can find at juliejason.com.
Julie Jason, JD, LLM, a personal money manager (Jackson, Grant of Stamford) and author, welcomes your questions/comments (readers@juliejason.com). Her awards include the 2018 Clarion Award, symbolizing excellence in clear, concise communications. Her latest book, a curated collection of Julie’s columns, is “Retire Securely: Insights on Money Management From an Award-Winning Financial Columnist.” To hear Julie speak, visit juliejason.com/events.