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SEC, FINRA Warn of High-Yield Investment Program Scams

Posted: Feb 23, 2016 | Posted in:

As we have recently discussed, so-called “high-yield” investment opportunities present a number of potential risks for individual investors. Among these risks is the ever-present threat that your investment opportunity is not actually an investment at all, but rather a scam designed to leave you with nothing.

Recently, both the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) have warned of the risks of high-yield investment program scams. They offer a number of resources that discuss common tactics used by scam artists, and offer ways that investors can avoid falling for high-yield scams. We summarize below:

Tactics of High-Yield Investment Program Scam Artists

A “high-yield investment program” is a type of unregistered investment typically offered by unlicensed individuals who promise minimal risk and significant returns. In some cases, these offers can include returns as high as 30 to 40 percent on a weekly – or even daily – basis. However, not all high-yield investment scams are so extreme. As a result, investors must be extremely careful to protect themselves. Remember: If an offer seems too good to be true, it probably is.

High-yield investment program scam artists employ a number of different tactics to try to get unsuspecting investors to give up their money. These include things like:

  • Email Newsletters and Solicitations – Today, many scam artists use email to target their victims. This includes both sending “personalized” offers that require you to act quickly in order to avoid missing an opportunity, as well as emailing professional-looking newsletters that promote high-yield investment programs.
  • Online Bulletin Boards – Often, scam artists will pose as investors in online bulletin boards and forums, talking about how they have achieved unbelievable returns through a new high-yield investment program. While these “investors” can often sound legitimate, the reality is that they are experienced scam artists who know exactly what they need to say in order to get people to buy in to their frauds.
  • Social Media – The SEC also reports that, increasingly, scam artists are using social media to promote fraudulent high-yield investment products. Facebook, Twitter, LinkedIn and YouTube are all popular platforms for scam artists seeking to bilk investors looking for high-yield opportunities.

Especially when it comes to unsolicited Internet communications, investors need to be extremely careful about who they trust. You never really know who is behind a keyboard, and if you rush into a high-yield investment, you could very well find yourself in a situation where you need to try to recoup your losses.

Tips for Avoiding High-Yield Scams

The following are some tips to help individual investors avoid falling for high-yield investment program scams:

Seek Professional Guidance

Never respond to an unsolicited email or social media connection without first speaking with an attorney or your investment advisor. These individuals will be able to help you determine if the opportunity presented is actually a scam.

Do Your Research

Never invest without first doing your research into the opportunity. Internet searches, news websites and FINRA’s BrokerCheck system are all good places to start when investigating high-yield investment programs.

Avoid Offers that Seem Too Good to Be True

If there really was an investment that promised no-risk 40 percent daily returns, there wouldn’t be a financial advisor in the country who wasn’t offering it to their clients. The reality is that all investments can cause losses; and, as a general rule, the highest yields come with the greatest amount of risk.

Speak with a High-Yield Investment Program Attorney at Zamansky LLC

At Zamansky LLC, we provide aggressive, experienced legal representation for victims of high-yield investment program scams. If you have recently lost money in an investment scam or have questions about one of our fraud investigations, we invite you to contact us for a free consultation.