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Common Signs of Investment Fraud

Simms Law, P.C. June 14, 2022

Investment fraud is a common occurrence. Fortunately, there are a number of warning signs that investors can look out for in order to help them avoid becoming victims of investment fraud. Below are some common signs of investment fraud.

  • Guarantees – When a broker, financial adviser, or other person guarantees that an investment will perform in a certain way, this is a sign that something may be amiss. Every investment contains a degree of risk, and no investments are guaranteed to be successful.

  • Unregistered securities – Investment scams often involve unlicensed persons selling unregistered securities. Such unregistered securities can include bonds, stocks, hedge funds, notes, oil or gas deals, and fictitious instruments.

  • Complicated investment strategies – If an investment strategy is overly complex, complicated, or confusing, then it should probably be avoided. Legitimate professionals should be able to explain any investment in a simple and understandable way.

  • Overly steady returns – Any investment that goes up monthly or provides overly steady returns regardless of market conditions should raise investor suspicions. Remember, even the safest investments occasionally experience downturns.

  • Missing documents – Missing documentation is a sign that an individual may be selling unregistered securities, and these should be avoided at all costs.

  • Account discrepancies – Missing funds, unauthorized trades, or other issues sometimes indicate churning or fraud. It’s important to review all account statements to ensure that account activity is consistent with investor instructions. In addition, it is important to know who holds one’s assets. Fraud is more likely when an adviser is also the keeper of the accounts and custodian of an investor’s assets.

  • Aggressive sales tactics – Investment professionals should never pressure investors to make immediate decisions about investments. High-pressure sales tactics are often a sign that something may be wrong, and investors should steer clear of investment professionals who use them. And even if no fraud is taking place, pressuring clients to invest in a certain manner is highly unprofessional.

Fort Lauderdale Investor Representation Attorney

At Simms Law, P.A., one of our primary focuses is the representation of investors—including those investors who believe they’ve been the victims of financial fraud. Unfortunately, securities fraud has been a part of the United States financial system since the advent of the stock market. For the retail investor, securities fraud typically occurs when a broker or financial advisor misrepresents the risks and key characteristics of an investment, causing the investor to purchase an unsuitable security. At Simms Law, we always take our clients’ concerns seriously and are aware of what is at stake when an investor suffers losses due to financial fraud. If you suspect that any suspicious activity has occurred in any of your investment accounts, or if you believe that you have been misled about the nature and risks of any of your investments, please contact us today for a free consultation.