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Investor Protection Guide: Promissory Note Scam

In a promissory note scam, the individuals perpetrating the scam often stay behind the scenes. They persuade others to sell promissory notes by promising them large commissions. The individuals who sell the promissory notes to investors often rely on the information they have been given, and they may not know that the information is false or misleading. The individuals perpetrating the scam use a portion of the money they collect from investors to pay the sellers their commissions. The fraudsters typically abscond with the rest.

Investor Protection Guide: Viaticals

A viatical settlement, also known as a life settlement, is a sale of a life insurance policy of an insured person with an abbreviated life expectancy.  Sellers are typically terminally ill patients who want to cash out of their life insurance policies before death.  Individuals without terminal illness, however, may also sell their life insurance policies.  Buyers purchase these policies at a price that is less than the death benefit of the policy.  When the seller dies, the investor collects the death benefit.

Investor Protection Guide: Prime Bank Schemes

Prime bank fraud is a type of investment scheme that promises extremely high yields over a short period of time. Individuals claim that they have access to secret financial products which they can buy at a discount and sell at a premium. In reality, these financial products are fictitious.  Individuals attempt to make these products seem legitimate by associating them with top world banks or secret government banking systems for the elite. Individuals seek to mislead investors into believing that well regarded financial institutions are associated with these financial products.

Investor Protection Guide: Misleading Senior Designations

Financial advisors may be designated “senior specialists” in order to imply a certain level of training and expertise regarding issues of importance to senior citizens. The Consumer Financial Protection Bureau (CFPB) reports that there are currently more than 50 such “senior designations” or “titles” being used by financial advisors, which is “extremely confusing” for consumers. A full copy of the CFPB report can be read here.

Investor Protection Guide: Investment Seminars ("Free Lunch")

Financial seminars are a marketing tool often used by broker-dealers and other entities to attract prospective clients. These seminars may be invitation-only or they may be advertised in local papers or on the internet. Financial seminars are often held at hotels or restaurants and may offer enticements such as free meals, books, or trips for attendees.  Unscrupulous investment seminar sponsors often target seniors.  At these seminars, participants are provided with a sales pitch and sales materials that describe possible investment strategies.

Investor Protection Guide: Internet Fraud

The Internet can serve as an efficient tool for investors, but it is also an excellent tool for defrauders.  The Internet allows individuals or companies to reach tens of thousands of people by building a web site, posting a message on an online bulletin board, entering a discussion in a live chat room, or sending mass e-mails.  Because defrauders can easily make their information look real and credible, investors may have difficulty telling the difference between fact and fiction.  

Investor Protection Guide: Advance Fee Fraud

Advance fee frauds involve victims paying money in the hope of receiving something of greater value.  This type of fraud takes on a myriad of forms, but they share some characteristics in common.  Defrauders will often reach out to an investor and offer to pay an exorbitant price for securities owned by the investor, even if these securities are nearly worthless.  The investor is sometimes referred to fake website that the defrauder uses to build credibility.  The defrauder may pose as a regulator.  Once the investor has paid a fee, the defrauder will disappear and

Investor Protection Guide: Pyramid Scheme

A pyramid scheme is an unsustainable, illegal business model where investment returns are typically from principals of investments or membership fees instead from the underlying investment gains.  It is often marketed as a foolproof way to turn a small amount of money into big returns. 


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