On January 10, 2022 the North American Securities Administrators Association (NASAA) released its annual list of top investor threats for 2022 and urged caution before purchasing popular and volatile unregulated investments – especially those involving cryptocurrency and digital assets. NASAA also announced guidance for investors, including steps to take to protect from fraud in the new year.
“The most common telltale sign of an investment scam is an offer of guaranteed high returns with no risk. It is important for investors to understand what they are investing in and with whom they are investing,” said Melanie Senter Lubin, NASAA President and Maryland Securities Commissioner. “Education and information are an investor’s best defense against investment fraud.”
The top threats to investors were determined by surveying North American securities regulators to identify the most problematic products, practices or schemes. The following were cited most often by state and provincial securities regulators:
- Investments tied to cryptocurrencies and digital assets,
- Fraud offerings related to promissory notes,
- Money scams offered through social media and internet investment offers and,
- Financial schemes connected to Self-Directed Individual Retirement Accounts.
Investors are urged to practice the following tips to identify and avoid investment scams:
Anyone can be Anyone on the Internet
Scammers are spoofing websites and using fake social media accounts to obscure their identities. Investors should always take steps to identify phony accounts by looking closely at content, analyzing dates of inception and considering the quality of engagement. To ensure investors do not accidentally deal with an imposter firm, pay careful attention to domain names and learn more about how to protect your online accounts.
Beware of Fake Client Reviews
Scammers often reference or publish positive, yet bogus testimonials purportedly drafted by satisfied customers. These testimonials create the appearance the promoter is reliable – he or she has already earned significant profits in the past, and new investors can reap the same financial benefits as prior investors. In many cases, though, the reviews are drafted not by a satisfied customer but by the scammer. Learn how to protect yourself with NASAA’s Informed Investor Advisory on social media, online trading and investing,
If it Sounds too Good to be True, it Probably is
Bad actors often entice new investors by promising the payment of safe, lucrative, guaranteed returns over relatively short terms – sometimes measured in hours or days instead of months or years. These representations are often a red flag for fraud, as all investments carry some degree of risk, and the potential profits are typically correlated with the degree of risk. Learn more about the warning signs of investment fraud.
For more information on top investor threats for 2022, check out the article NASAA posted on their website.
MasterCompliance provides expert consulting, outsourcing, and implementation tools in planning and budgeting for your firm’s compliance responsibilities. If there are any areas where you would like to explore additional assistance or services, please contact us.