Fraudsters may falsely claim that they are registered with the Financial Industry Regulatory Authority (FINRA) or a state securities regulator or Securities and Exchange Commission(SEC) to lure investors into scams or even impersonate real investment professionals registered with these organizations.
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Scammers may use a presently or formerly registered firm's or investment professional's name, address, registration number, logo, photo, or website. In addition, they use a variety of strategies to convince investors that they are registered in FINRA or SEC. Some popular tricks adopted by fraudulent b
rokers include the following:
- False Websites: Fraudsters may build up websites with URL addresses or names similar to those of registered firms or investment experts to deceive investors into believing that the fraudsters are registered or related to a registered firm or investment professional.
- Fake social media profiles: Fraudsters may create profiles resembling registered investment advisers on famous social media networks and then message investors for money.
- Cold Calling describes a situation in which someone contacts you through a call. Fraudsters may assemble boiler rooms with teams of people, cold calling investors for money while posing as registered business employees. The con artists may utilize technology to make it appear as calling from the firm's office.
- Documenting misrepresentation or misreporting by Fraudsters may falsify their firm's SEC registration to attract investors, citing the firm's Form D filings as evidence. Impersonating a registered investment adviser and generating a fraudulent version of a public report using the professional's identity and CRD number can be used to recruit investors.
Red flags of Broker scams:
Be wary if you see these warning signals, regardless of whether someone claims to be registered with the SEC:
- High investment returns are guaranteed: Promises of significant investment returns, frequently backed by assurances of minimal or no risk, are classic symptoms of fraud. Every investment carries some level of risk, and a high level of risk usually accompanies the potential for significant profits.
- Unexpected and unsolicited offers to generate investment returns that seem “too good to be true” may be part of a scam.
- Payment Methods for Investments: Red Flags
- Credit Cards: Most legal and registered investing firms do not enable customers to use credit cards.
- Licensed and registered financial firms do not demand their consumers to use digital asset wallets or digital assets to invest.
- If you pay for an investment using a wire transfer or a check, be wary if you're asked to send or make the payment out to a person or an independent firm, if the address is suspicious, or you're urged to mention that the price is for a reason unrelated to the investment. If you wire money outside of the country for an investment that turns out to be a scam, you will almost probably never see your money.
By learning about these Red flags, you can protect yourself from scammers.
Summary:
A currently or previously registered firm or investment professional's name, address, registration number, logo, photo, or website may be misappropriated by fraudsters. Websites with URL addresses or characters that are similar to those of authorized firms or financial experts may be set up by fraudsters. Whether the scammers pretend to be SEC-registered, investment frauds should be avoided. To entice investors, fraudsters may misrepresent their company's SEC registration. In addition, unsolicited offers that appear to be “too good to be true” could be a fraud.
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