Investing Scams: How to Protect Yourself and Your Money
Investors are prime targets for scammers – and the financial hit if you're impacted can be massive. Here's what to watch for and how to protect yourself.
These days, it feels like I'm getting targeted by scammers every week. And I'm not alone. According to Pew Research Center, a majority of Americans surveyed receive deceptive messages at least once a week.
Most of these attempted scams come via phone calls, text messages or email, with 33% of respondents receiving a fraudulent message through social media.
The financial impact can be noticeable for those who fall victim to a scam, too. Indeed, 30% of those surveyed by Pew Research said a scam impacted their personal finances "a fair amount" or "a great deal," while another 27% said their finances were affected to some extent.
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That's why I took notice when the Securities and Exchange Commission (SEC) recently sent around a reminder of common investing scams consumers should be aware of.
These are hardly new, but it's always a good idea to keep potential scams fresh in your head to protect yourself and your money against possible attacks.
Investing scams to watch for
Impersonating an SEC official: The Securities and Exchange Commission warns that scammers are sending fraudulent messages that include the government agency's official seal, links to its website and/or profiles of actual SEC officials. The messages are promising actions, such as recovering lost funds in exchange for payment of an advance fee.
Stock-picking tips: This is a common investing scam, according to the SEC, with scammers using social media – including investing group forums – or email to promote what they say are the best stocks to buy.
In some instances, these could be considered a "pump and dump scheme," where the fraudster claims to have "inside information" on a stock, either anonymously or posing as an expert, to get others to buy it and drive the share price higher. Once this happens, the scammer will stop promoting the stock and unload their shares before the price falls. Those who do not close their position in time will likely lose most of their investment.
How to avoid investing scams
One of the best ways investors can avoid scams is to stay educated. Signing up for the Securities and Exchange Commission's daily bulletins will allow you to stay up-to-date on new and common investing scams. You can also check that any social media accounts you are interacting with have been verified.
If you do receive an unsolicited offer via email, text message or social media, exercise extreme caution. Many "too good to be true" investment opportunities are often just that. The best move is to pass on the "get rich quick" offer or contact a trusted financial adviser to gauge their opinion.
And never share your information for a potential investment opportunity without vetting it and the person or firm who is offering it first.
Watch for red flags, including promises of guaranteed or massive returns. There's no sure thing in the market and any assurances of quick and easy profits are glaring warning signs.
It's also imperative to ask questions and do your research on any potential investment before committing your hard-earned money to it. The internet offers ample opportunities to learn about a company, either through its own investor relations pages or on the SEC's EDGAR database, which provides free access to corporate information.
And you can check out the trustworthiness of those promising you investment advice on the Financial Industry Regulatory Authority's (FINRA) BrokerCheck or the SEC's Investment Adviser databases.
What to do if you fall victim to an investing scam
Falling for a scam happens. I thought I got a great deal on Bombas socks a few years back … only the socks I bought weren't Bombas.
And a family member of mine thought they were getting tickets to Taylor Swift's "The Eras Tour," but as soon as they sent $200 via Venmo, the person who promised them tickets disappeared along with their money.
In the age of rapidly advancing technology and artificial intelligence (AI), it's becoming harder and harder to discern between what's real and what's not.
If you suspect an investing scam or fall victim to one, there are steps to take to protect yourself and, if you have been tricked, recover some or all of your money.
One of the first is to collect all relevant information you have on the scam, including dates, contact information and screenshots. If you did provide financial information to a scammer, you'll want to contact your bank and/or broker, change your passwords, freeze your credit – and possibly lock your social security number.
You can then contact the SEC or FINRA to report the fraudulent activity. You can also get in touch with state securities administrators via the North American Securities Administrators Association (NASAA).
Additionally, the Federal Bureau of Investigation's (FBI) Internet Crime Complaint Center allows you to file a complaint for online crimes.
You can also seek out emotional support. Two options offered by FINRA are Give an Hour, which offers peer support programs, and AARP, which runs a toll-free fraud watch helpline.
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