Arizona Corporation Commission lists traps for investors - East Valley Tribune: Business

Arizona Corporation Commission lists traps for investors

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Posted: Saturday, June 2, 2007 7:25 am | Updated: 5:54 pm, Fri Oct 7, 2011.

They’re out there just hoping investors will slip up and fall for something that sounds too good to be true. The Arizona Corporation Commission has released its annual forecast of the top 10 traps likely to ensnare investors.

“Those 10 really comprise the bulk of what we’re seeing these days,” said Heather Murphy, commission spokeswoman. “The biggest thing that investors should do to protect themselves is call our Securities Division to see if the investment and the person promoting the investment are properly registered.”

Con artists are sophisticated, the swindles are creative, and investors have to do their homework, said Commissioner Bill Mundell.

“It is a sad reality, but most people spend more time researching the next car they’re going to buy than they do researching the person who will be investing their hard-earned money,” he said.

This year’s top 10 traps are:

• Affinity fraud, or fraudulent investments that target religious, ethnic, cultural and professional groups.

• Foreign exchange trading. The scams attract customers with sophisticatedsounding offers placed in newspaper advertisements, radio promotions or on Internet sites.

• Internet fraud. Fraud artists steal investor funds by raiding their online trading accounts. Also, “pump and dump” schemes remain prevalent online.

• Investment seminars, promising a free meal along with “higher returns and little to no risk”.

• Mining ventures, or unregistered or fraudulent offerings in precious metal mining ventures.

• Oil and gas scams. Rising oil and natural gas prices have made a variety of traditional and alternative energy projects attractive to investors, but most are high-risk and inappropriate for smaller investors.

• “Prime bank” schemes. Prime banks do not exist and the scam artists have no intention of creating a profit for anyone but themselves.

• Real estate investment contracts. Just because an investment involves real estate, it may still be a security, subject to full regulation under the state and federal securities laws.

• Unlicensed individuals and unregistered products. Anyone selling securities without a valid securities license should be a red light for investors.

• Unsuitable sales. Variable and equity indexed annuities, for example, may be unsuitable for senior citizens who may need ready access to their funds in the event of a serious medical problem.

“Someone soliciting you via telephone call, an e-mail or a chance meeting somewhere, they don’t know what your particular investment goals are or what your priorities are,” Murphy said. “They want to make the sale. You should always be filtering the information through that.”

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