Articles Tagged with investment

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AdobeStock_78797750-300x199It’s your money.  You worked hard to earn it. It’s taken years to save it. Now you need to protect it. Here are some tips to help you make more informed investment choices and protect yourself from investment scams.

  1. Check out the “salesperson.” Just because someone says they have a securities license doesn’t mean it’s true. We recently had a potential client call with a complaint about his “stockbroker” who we quickly discovered hasn’t been licensed since the 1990’s. Checking out purported stockbrokers is easy and free at FINRA’s BrokerCheck site. In addition to information about the securities licenses the individual has, it will show you his or her employment history, if he or she has ever filed for bankruptcy, and any customer complaints or charges by securities regulators.
  1. Don’t believe promises of little or no risk with high returns. The higher the returns, the riskier the investment. Period. 
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stock marketIf you have lost money in a securities investment, obviously you would be happy to recoup some of those funds.  Many companies that offer assistance with recovering lost capital, however, are likely fraudulent.  A company may sound credible, have authentic looking documents, and a fancy website, but if the deal sounds too good to be true, it probably is a scam.

Tips for Investors

  • Be a Skeptic. Assume that any “recovery” company that reaches out to you is a fake until you can independently verify it is a legitimate company – especially if it claims to be registered with FINRA. Look it up on FINRA’s BrokerCheck site and use the contact information on the BrokerCheck report to reach out to the firm.
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Prime Bank Instrument Fraud 

If you have been approached to invest in “prime bank” instruments, don’t do it!  It is a scam. Prime bank scams purportedly involve the trading of prime bank instruments issued or guaranteed by financial institutions such as the World Bank, the International Monetary Fund, or the U.S. Federal Reserve Bank.  Promoters of these supposed prime bank investments claim investors are guaranteed to receive high-yield returns in a matter of days or weeks, with little or no risk.  According to the U.S. Securities and Exchange Commission, these investments do not exist.

Fraudsters may use complex and official-sounding terms such as, debenture, bank guarantee, private funding project, offshore trading program, trading facility, or guaranteed bank note, in an effort to make the scheme seem legitimate.  Oftentimes, promoters will claim that the instruments are available by invitation only to select clients. They may claim these are the “secret” way wealthy people make money and will cite a requirement for secrecy if a potential investor asks for references.  Some goes so far as to have investors sign official-looking non-disclosure agreements.

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What Does it Mean to Trade Stock Options?

Options are complex investments and can carry substantial risk. Before you decide to trade options, you should understand the basics. Options can be used with a wide range of financial products.  This blog will focus on the most vanilla of examples, trading stock options.

What are Options?

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Helping Families of Kids With Special Needs Save for the Future  – ABLE Plans

Starting July 1, Florida families with children who have special needs will have another option available to help them save for the future costs of caring for their loved one.  Florida’s ABLE United Program is one of four such plans nationwide.  The ABLE (Achieving a Better Life Act) investment plan will allow families to save tax-free for future expenses, while maintaining government benefits such as Supplemental Security Income and Medicaid.

Who is eligible for a Florida ABLE United Program account?

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Brokerage account statements can be lengthy and complicated.  Having a basic idea of what you are looking at, however, can help you spot mistakes, unauthorized activity, and even fraud. Here are the key types of information generally found on monthly account statements and some potential red flags that warrant follow-up with your brokerage firm.

General Appearance

Account statements should look professional and not look altered in any way.  The brokerage firm’s information and logo should be uniform throughout the statement and should match all of the other documentation you have received from the company – trade confirmations, new account forms, and correspondence.

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As many readers may know, “crowdfunding” is a modern innovation for raising money.  Typically using internet sites like Indiegogo, Kickstarter, or GoFundMe, a person can set up a website to raise money to develop a product or initiate some kind of project.  Projects funded through crowdfunding range the gamut from feature films to video games to new styles of clothing.  Virtually any project can be funded through crowdfunding.  In return, “investors” will get some small benefit, like early access to the feature film.

As of this week, new SEC regulations have been put in place to allow the sale of securities in small business through crowdfunding.  This securities crowdfunding will be overseen and regulated by FINRA.

According to FINRA, anyone can invest in crowdfunded securities, but the amount one can invest depends on an individual’s income and net worth.  For instance, if your annual income or your net worth is less than $100,000, then you can invest a maximum of $2,000, or 5% of either your income or net worth (whichever is greater).  If, however, your annual income and your net worth are both over $100,000, then you can invest up to 10% of your annual income or net worth (whichever is greater).  The total amount invested in crowdfunded securities can never exceed $100,000.

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mosquito-on-my-hand-1385575The SEC has issued an Investor Alert regarding fraudsters attempting to profit by exploiting the dangers associated with the Zika virus.  For those not following the news, Zika is a tropical disease transmitted by mosquitoes.  Outbreaks have been reported in South America, with cases popping up in the United States.  Zika infections in pregnant mothers have recently been linked to microcephaly in babies, i.e., babies born with heads much smaller than expected, leading to significant public health concerns.

According to the SEC, fraudsters are attempting to sell investments in companies supposedly developing treatments or other products for Zika.  Scams could include so-called “pump-and-dump” schemes, whereby fraudsters encourage investors to buy shares in a company or a fund by spreading rumors that the company is involved in developing a treatment or cure for Zika.  The rumors prompt investors to buy the shares, thus driving up the price.  The fraudsters then sell their shares while the price is high but before the truth is revealed.  Penny stocks are particularly susceptible to this kind of fraud.  As always, be wary before sinking a significant sum of money in penny stocks.

The SEC recommends that investors use common sense before putting money in a Zika-related investment.  Specifically, before making any investment – especially one tied to Zika – an investor should do the following:

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In our law firm, we frequently represent elderly clients in claims against brokerage firms and financial advisors.  These claims usually include allegations that the broker took advantage of the elderly client, or recommended improper investments that benefited the broker more than the client.

Why and how do the elderly become so vulnerable to stockbroker abuse?  Some of the answers may surprise you.

Isolation and Loneliness  We have seen, over and over, elderly clients who are isolated and lonely.  We practice in South Florida, a haven for elderly retirees.  Many times, our clients’ families and loved ones live thousands of miles away.  On a day-to-day basis, these clients have very few friends or social interactions.

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Last spring, FINRA launched a Securities Helpline for Seniors – known as HELPS – as a resource for senior investors with questions and concerns.  With the country’s growing population of senior citizens, who are often targeted in fraudulent and deceptive investment schemes, the HELPS line is just another resource in FINRA’s recent push to protect our aging population.

The HELPS line launched on April 20, 2015, and through December 2015, more than 2,500 calls had been placed through the hotline.  The average age of the caller was 70 (though the actual age range was 22 to 100), and the calls lasted an average of 25 minutes each.  In 2015, HELPS staff assisted callers in recovering $750,000 in voluntary reimbursements from securities firms.

FINRA is also using data collected during calls to assist it with its regulatory goals.  By tracking trends in the calls placed to the hotline, FINRA can more readily issue Investor Alerts on topics of current interest.  For instance, after a spate of calls about transfer on death accounts, FINRA issued an Investor Alert about that specific topic.