How Investment Swindles Work


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How Investment Swindles Work

 

How They Work and How to Avoid Them

Including
16 questions that can turn off an investment crook

While the vast majority of persons in the futures industry and other
sectors of the investment community serve the investing public
conscientiously and ethically, there are inevitably those few who seek to
exploit the trust which others have laboured so hard to earn.

This booklet has been prepared as a part of NFA's continuing public
education efforts to assist you in recognising and avoiding such individuals.

 

Contents

The
Multi-Billion Dollar Business of Investment Fraud

Who are
the Investment Swindlers?

Who are
the Victims of Investment Fraud?

How
Investment Swindlers Find (or Attract) Their Victims

Techniques
Investment Swindlers Use

Several
Investment Swindles and How They Worked

Questions
That Can Turn Off an Investment Swindler

Before
You Invest, Investigate

Finally,
Don't Lose Touch with Your Money

The
Multi-Billion Dollar Business of Investment Fraud

Americans are investors. We purchase stocks and bonds, contribute to
savings programs, own real estate, participate in futures and options
markets, acquire collectibles, provide start-up capital for new business
ventures, buy franchises, and the list goes on. The strength of our economy
is in large measure the product of our combined investments.

Perhaps more so than any people in the world, we enjoy an
ever-expanding variety of investments to choose from, coupled with the
freedom to make our own investment decisions. It's our money and we can
invest it as we wish.

Unfortunately, some unscrupulous promoters abuse our freedom to choose
by concocting investment schemes that have zero possibility of making money
for anyone other than themselves. Such persons promise investment rewards
they cannot possibly deliver and have no intention of delivering.

They are swindlers.

Many of them are very good at it. Their annual take through lying and
deceit is in the billions of dollars. If one estimate of $10 billion a year
lost to investment fraud is accurate, that's more money than the combined
annual profits of the nation's three major auto makers! Some say even that
estimate may be too low.

Successful investment swindlers use every trick in the book, and some
that aren't even recorded, to convince you that none of the descriptions and
precautions in the following pages apply to them. After all, they are
offering you a once-in-a-lifetime opportunity to make a lot of money quickly
and you do trust them, don't you? As will be seen, some of their methods of
gaining your trust are truly ingenious.

Who are the Investment Swindlers?

 

They are a faceless voice on a telephone. Or a friend of a friend. They
may perform surgery on their victims' savings from a dingy back office or
boiler-room or from an opulent suite in the new bank building. They may wear
three-piece suits or they may wear hard hats. They may have no apparent
connection to the investment business or they may have an alphabet-soup of
impressive letters following their names. They may be glib and fast-talking
or so seemingly shy and soft-spoken that you feel almost compelled to force
your money on them.

The first rule of protecting yourself from an investment swindle is
thus to rid yourself of any notions you might have as to what an investment
swindler looks like or sounds like. Indeed, some swindlers don't start out to
be swindlers. There are case histories in which individuals who held
positions of trust and esteem-accountants, attorneys, bona fide investment
brokers and even doctors-have sacrificed their ethics for the fast buck of
running an investment scam.

In still other cases, investment programs that began with legitimate
intentions went sour through happenstance or poor management--leading the
promoter to mishandle or abscond with investors' capital. Whether an
investment is planned as a scam or simply becomes one, the result is the
same.

This is why, as we will discuss, protecting your savings against fraud
involves at least three steps: Carefully check out the person and firm you
would be dealing with; take a close and cautious look at the investment offer
itself; and continue to monitor any investment that you decide to make. No
one of these precautions alone may be sufficient.

Who are the Victims of Investment Fraud?

 

If you are absolutely certain it could never be you, the investment
swindler starts with a big advantage. Investment fraud generally happens to
people who think it couldn't happen to them.

Just as there is no typical profile for swindlers, neither is there one
for their victims. While some scams target persons who are known or thought
to have deep pockets, most swindlers take the attitude that everyone's money
spends the same. It simply takes more small investors to fund a large fraud.
In fact, some swindlers deliberately seek out families that may have limited
means or financial difficulties--figuring such persons may be particularly
receptive to a proposal that offers fast and large profits. A favourite pitch
is that small investors can become rich only if they learn and employ the
investment strategies used by wealthy persons. Naturally, the swindler will
teach them!

Although victims of investment fraud can differ from one another in
many ways, they do, unfortunately, have one trait in common: Greed that
exceeds their caution. Plus a willingness to believe what they want to
believe. Movie actors and athletes, professional persons and successful
business executives, political leaders and internationally famous economists
have all fallen victim to investment fraud. So have hundreds of thousands of
others, including widows, retirees and working people--people who made their
money the hard way and lost it the fast way.

How Investment Swindlers Find (or Attract) Their Victims

 

Swindlers attempt to mimic the sales approaches of legitimate
investment firms and salespersons. Thus, the fact that someone may contact
you in a particular way--by phone, mail, or even through a referral--should
not in itself be viewed as an indication that the investment is or isn't
shady. Many totally reputable firms also use the same methods to effectively
and economically identify individuals who may have an interest in their
investment products and services.

Bearing in mind that investigate before you invest is good advice no
matter how you are approached, these are some of the methods con men commonly
employ to contact their victims-to-be.

* Telephone

So-called telephone boiler-rooms remain a favourite way for swindlers
and their sales squads to quickly contact large numbers of potential
investors. Even if a swindler has to make 100 or 200 phone calls to find a
mooch (one of the terms swindlers use for their victims), he figures that the
opportunity to pocket thousands of dollars of someone's savings is still good
pay for the time and cost involved.

* Mail

Some sellers of fraudulent investment deals buy bona fide mailing
lists--names and addresses of persons who, for example, subscribe to a
particular investment-related publication, who have responded to previous
direct mail offers, or who have other characteristics that swindlers look
for. In the hope of avoiding notice by postal authorities, mail order
swindlers may not make a direct or immediate pitch for your money. Rather,
they often seek to entice you to write or phone for more information. Then
comes a call from the salesperson or the person who closes the deal. Some may
phone even if you didn't respond to the mailing.

* Advertisements

A newspaper or magazine ad may offer (or at least hint at)profit opportunities
far more attractive than available through conventional investments. Once
you've taken the bait, the swindler will then attempt to "set the
hook." Even though investment crooks know that regulatory agencies
regularly monitor ads in major publications, some nevertheless use such
publications in the hope of being able to hit-and-run before an investigator
shows up. Others advertise in narrowly circulated publications they think
regulators may be less likely to see.

* Referrals

One of the oldest schemes going involves paying fast, large profits to
initial investors (actually from their own or other peoples' investments)
knowing that they are likely to recommend the investment to their friends.
And these friends will tell their friends. Soon, the swindler no longer needs
to find new victims; they will find him. (See page 16.)

* The "Reputable" Business

Some swindlers go first class. Using profits from previous swindles,
they rent plush offices, hire an interior decorator and professional-sounding
receptionist and open what has the appearance--but not the reality of a
reputable investment firm. You may even have to phone for an appointment, and
once there don't be surprised to be kept waiting (that's intended to make you
all the more eager). This kind of swindler's success depends on how long he
can keep his victims from knowing they are being cheated. Investors are
assured that their large profits are being reinvested to earn even larger
profits. Such a swindler may join local civic groups, contribute to
charities, and generally play the role of solid citizen.

Techniques Investment Swindlers Use

 

Their techniques are as varied as their methods of establishing
contact. If there is a common denominator, however, it is their ability to be
convincing. The skills that make them successful are essentially the same
skills that enable any good salesperson to be successful.

But swindlers have a decided advantage: They don't have to make good on
their promises. In the absence of this responsibility, they have no
reluctance to promise whatever it takes to persuade you to part with your
money. These are some of their techniques:

* Expectation of Large Profits

The profits a swindler talks about are generally large enough to make
you interested and eager to invest--but not so large as to make you overly
sceptical. Or he may mention a profit figure he thinks you will consider
believable and then, as a further enticement, suggest that the potential
profit is actually far greater than that. The latter figure, of course, is
the one he hopes you will focus on. Generally speaking, if an investment
proposal sounds too good to be true, it probably is.

* Low Risk

Some are so blatant as to suggest there's no risk--that the investment
is a sure money maker. Obviously, the last thing a swindler wants you to
think about is the possibility of losing your money. (If you ask how you can
be certain your money is safe, you can count on a plausible-sounding answer.
Besides, at this point, he figures you will believe what you want to believe.)

To make his pitch more credible, a swindler may acknowledge that there
could be some risk--then quickly assure you it's minimal in relation to the
profits you will almost certainly make. A con man may become impatient or
even aggressive if the question of risk is raised--perhaps suggesting that he
has better things to do than waste time with people who lack the courage and
foresight needed to make money! With this kind of put down, he hopes you
won't bring up the subject again.

* Urgency

There's usually some compelling reason why it's essential for you to
invest right now. Perhaps because the investment opportunity can "be
offered to only a limited number of people." Or because delaying the
investment could mean missing out on a large profit (after all, once the
information he has confided to you becomes generally known, the price is sure
to go up, right?).

Urgency is important to a swindler. For one thing, he wants your money
as quickly as possible with a minimum of effort on his part. And he doesn't
want you to have time to think it over, discuss it with someone who might
suggest you become suspicious, or check him or his proposal out with a
regulatory agency. Besides, he may not plan on remaining in town very long.

* Confidence

They don't call them con men for nothing! They sound confident about
the money you are going to make so that you will become confident enough to
let go of your savings. Their message is that they are doing you a favour by
offering the investment opportunity. A swindler may even threaten (pleasantly
or otherwise) to end the discussion by suggesting that if you are not really
interested there are many other people who will be. Once you protest that you
are interested, he figures your savings are practically in his pocket.

Although you can't necessarily spot a con man by the way he talks, most
are strong-willed, articulate individuals who will dominate the
conversation-even if they do it in a low-key, friendly sort of way. The more
they talk, the less chance you have to ask questions.

Several Investment Swindles and How They Worked

 

There's a saying among swindlers that it's not the scam that counts,
it's the sell. Judging from the number of arcane and often outlandish schemes
that have been employed to separate otherwise prudent people from their
money, the saying would seem to reflect reality. The evidence is that if
people can be made believers, they can be sold practically anything. Consider
several of the ways in which hustlers of phoney investments have won the
confidence of persons whom they planned to victimise.

The Old-Fashioned Ponzi Scheme

It's become one of the oldest and most often employed investment
schemes because it's proven to be one of the most lucrative. While there are
innumerable variations, here is how a person we will call Frank C. practised
it. At the outset, Frank approached a relatively small number of influential
persons in the community and offered them the opportunity to invest--with a
guaranteed high return--in a computer-generated program of arbitrage in
foreign currency fluctuations. To be sure, it sounded high tech and
sophisticated but Frank had his eye on sophisticated and well-heeled victims.

Within a short period of time, he approached and sold the scheme to
still other investors--then promptly used a portion of the money invested by
these persons to pay large profits to the original group of investors. As
word spread of Frank's genius for making money and paying profits, even more
would-be investors anxiously put up even larger sums of money. Some of it was
used to recycle the fictitious profit payments and, like a pebble in the
water, the word of fast and fabulous rewards produced an ever-widening circle
of eager investors. And more money poured in.

And Frank C. left town a wealthy man.

The Infallible Forecaster

Jim L. (among his many aliases) had a full-time job in the daytime, but
with assets that consisted only of a phone, patience and an easy way of
talking he managed to parlay a night time sideline into an ill-gotten
fortune. The routine went like this.

Jim would phone someone we'll call Mrs. Smith and quickly assure her
that, "No," he didn't want her to invest a single cent. "Never
invest with someone you don't know," he preached. But he said he would
like to demonstrate his firm's "research skill" by sharing with her
the forecast that so-and-so a commodity was about to experience a significant
price increase. Sure enough, the price soon went up.

A second phone call didn't solicit an investment either. Jim simply wanted
to share with Mrs. Smith a prediction that the price of so-and-so a commodity
was about to go down. "Our forecasts will help you decide whether ours
is the kind of firm you might someday want to invest with," he added. As
predicted, the price of the commodity subsequently declined.

By the time Mrs. Smith received a third call, she was a believer. She
not only wanted to invest but insisted on it--with a big enough investment to
make up for the opportunities she had already missed out on.

What Mrs. Smith had no way of knowing was that Jim had begun with a
calling list of 200 persons. In the first call, he told 100 that the price of
so-and-so a commodity would go up and the other 100 were told it would go
down. When it went up, he made a second call to the 100 who had been given
the "correct forecast." Of these, 50 were told the next price move
would be up and 50 were told it would be down.

The end result: Once the predicted price decline occurred, Jim had a
list of 50 persons eager to invest. After all, how could they go wrong with
someone so obviously infallible in forecasting prices?

But go wrong they did, the moment they decided to send Jim a half
million dollars from their collective savings accounts.

All That Glitters

Not only did the two brothers have a fancy office building with their
own company name on it, but the investment offer seemed sound and
straightforward: "Instead of buying gold outright and holding it for
appreciation, make a small down payment that the firm could use to secure
financing that would permit much larger quantities of gold to be bought and
held for the investor's account." That way, when the price of gold
rose--as was "sure to happen"--investors stood to realise highly
leveraged profits.

The company provided storage vaults where investors could view the
wall-to-wall stacks of glittering bullion. By the time authorities caught
wind of the scheme's suspicious smell and looked for themselves, it turned
out the only thing gold was the colour of the paint on the cardboard used to
construct look-alike bars of bullion.

The counterfeit gold, however, proved far easier to find than the
millions of dollars of investors' money. Most of that is still missing.

16 Questions That Can Turn Off an Investment Swindler


The first line of defence against investment fraud is your inalienable right
to ask questions and--until you get the right answers--to say "No."
And mean no. Not surprisingly, this is usually an investment swindler's first
point of attack. To keep you from asking questions, he asks them! Invariably,
the questions have "yes" answers, such as "You would at least
be interested in hearing about such a fantastic investment opportunity,
wouldn't you?" or "You would like to make a large amount of money
in a short period of time with little or no risk, right?"

One difference between a reputable investment firm and a swindler is
that reputable firms encourage you to ask questions, to obtain as much
information as possible, to clearly understand the risks involved, and to be
entirely comfortable with any investment decision you make. The only thing a
swindler wants is your money These are some of the questions that swindlers
don't like to hear:

1. Where did you get my name?

If the response is that you were chosen from a "select list of
intelligent and prudent investors," that select list may be the
telephone directory, or a purchased list of persons who have bought certain
types of books, subscribed to particular magazines, or responded to newspaper
ads. If you have made ill-advised investments in the past, you can be pretty
sure your name is on someone's alumni list. It's the list swindlers prize
most: Easy preys who are eager to recoup (but are doomed to repeat) their
earlier losses.

2. What risks are involved in the proposed investment?

Except for obligations of the U.S. Treasury, which are considered
risk-free, all investments involve some degree of risk. And some investments,
by their nature, involve greater risks than others. Keep in mind that if the
salesman had knowledge of a sure-thing, big-profit investment opportunity, he
wouldn't be on the phone talking with you.

3. Can you send me a written explanation of your investment so I can
consider it at my leisure?

For someone peddling fraudulent investments, that can be a double
turnoff. For one thing, most crooks are reluctant to put anything in writing
that might cause them to run afoul of postal authorities or provide material
that, at some point, might become evidence in a fraud trial. Secondly,
swindlers don't want you to do anything at your leisure. They want your money
now.

Accordingly, it's a good rule of thumb that any investment which
"absolutely has to be made immediately" shouldn't be made at all.
You may not always be right, but you are less likely to be sorry.

4. Would you mind explaining your investment proposal to some third
party, such as my attorney, accountant, investment advisor or banker?

If the answer goes something along the lines of "normally, I'd be
glad to, but there isn't time for that," or if the salesman snaps back
by asking "can't you make your own investment decisions." these are
virtually certain clues that your final answer should be an emphatic
"No."

5. Can you give me the names of your firm's principals and officers?

Although some persons who establish and operate dishonest firms change
their own names as often as they change their firms' names, even the hint
that you are the kind of investor who checks into things like that can be a
fast turn-off for a swindler.

6. Can you provide references?

Not just another list of other investors who supposedly became
fabulously wealthy (the names you get may be the salesman's boss or someone
sitting at the next phone), but reputable and reliable recommendations such
as a bank or well-known brokerage firm that you can easily contact.

7. Do you have any documents such as a prospectus or risk disclosure
statement that you can provide?

This may not be available in connection with all types of investments
but in many investment areas--such as securities, futures and options
trading--it's required. And there can be requirements that you be provided
with this information and acknowledge in writing that you have read and
understood it. Obviously, it's not the sort of information a swindler is
likely to distribute.

8. Are the investments you are offering traded on a regulated exchange,
such as a securities or futures exchange?

Some bona fide investments are and some aren't, but fraudulent
investments never are. Exchanges have strict rules designed to assure fair
dealing and competitive price determination. There are also in-place
mechanisms to provide for rule enforcement and to impose severe sanctions
against those who fail to observe the rules.

9. What governmental or industry regulatory supervision is your firm
subject to?

If the salesman rattles off a list that ranges from the FBI to the Boy
Scouts, tell him you'd like to check the firm's good standing before making
an important investment decision. Then verify the response. Few things
discourage a swindler faster than the thought that his first visitor the next
morning may be from a regulatory agency.

If, on the other hand, you are told his particular area of investment
isn't subject to regulation (perhaps because everyone in his business is an
ethical, upstanding citizen), take that explanation for whatever you think
it's worth. At the very least, keep in mind that any ongoing supervision
which isn't being provided by a regulatory organisation or agency will have
to be provided by you.

10. How long has your company been in business?

In any kind of business activity, there can be advantages to dealing
with a known, established company. This isn't to say that new businesses
aren't starting up all the time or that the vast majority aren't perfectly
reputable. But if you find yourself talking with someone who doesn't seem to
have a past, it can be worthwhile to find out why. Many swindlers have been
running scams for years but understandably aren't anxious to talk about it.

11. What has your track record been?

Before you accept a salesman's assurance that he can make money for
you, you have the right to know what his performance has been in making money
for others. And ask to have the information (if there is any) in writing.
Boasting over the phone is one thing; putting it down on paper is quite
another. In any case, even if you are able to obtain a documented performance
record, don't lose sight of the fact that past performance in itself provides
no assurance of future performance.

12. When and where can I meet with you or with another representative
of your firm?

Chances are a crooked operator--particularly if he is operating out of
a telephone boiler-room--isn't going to take the time to visit with you and
even more certainly doesn't want you to see his place of business.

13. Where, exactly, will my money be? And what type of regular
accounting statements do you provide?

In many investment areas, such as futures trading, firms are required
to maintain their customers' funds in segregated accounts at all times. Any
mingling of investors' funds with those of the firm or its principals is
prohibited. You might also want to find out what, if any, routine outside
audits the firm's account records are subject to.

14. How much of my money would go for commissions, management fees and
the like?

And ask whether there will be other costs such as interest or storage
charges, or whether the investment agreement involves any type of profit
sharing arrangement in which the firms' principals participate. Insist on
specific answers, not glib and evasive responses such as "that's not
important" or "what's really important is how much money you are
going to make." And, again, get it in writing, just as you would any
other type of contract.

15. How can I liquidate (i.e. sell the item I'd be investing in) if and
when I decide I want my money?

If you find that the investment is illiquid, or there would be
substantial costs if liquidated, or that you are unable to get straight and
solid answers, these are all things to consider in deciding whether you want
to invest.

16. If disputes should arise, how can they be resolved?

Short of having to go to court to sue someone, does the company or
regulatory organisation provide a mechanism for resolving disputes equitably
and inexpensively through arbitration, mediation, or a reparations procedure?
Aside from seeking important information, you may be able to detect whether
the salesperson is uncomfortable or impatient with this line of questioning.
Swindlers generally will be.

Before You Invest, Investigate


Asking some or even all of the questions just suggested isn't likely to
produce straight answers from a crooked investment promoter but, as
indicated, the very fact that you are asking such questions can be a
turn-off. Bear in mind, however, that no matter how persistently or skill
fully you pose the questions, experienced con men are at least equally
skilled in evading them, in providing downright dishonest answers, and in re
focusing the conversation on your "tremendous profit opportunity."

Bear in mind also that, while separating you from your money is the
swindler's primary goal, the very last thing he wants you to do is check him
out. That could cause you not to invest or, worse still, alert regulators
that someone they know well has set up shop in a new area or is running a new
scam.

For this reason, most con men deliberately make themselves difficult to
investigate: By tailoring their schemes to operate in regulatory cracks where
federal or national regulatory organisations may lack clear-cut jurisdiction;
by operating in states or communities where authorities are known to be
short-staffed or occupied with more pressing criminal activities; by changing
their names or modus operandi, by stressing the urgency of the investment so
you won't have time to investigate; and by targeting victims who may not know
how or where to check them out.

Moreover, as described in swindle scenarios on pages 8, 9, and 10 of
this booklet, con men have numerous and ingenious ways of seeking to convince
you there is no need to investigate. For example, your friends, neighbours or
business associates invested and they made money, right? That, of course, is
why ever-popular Ponzi schemes (named after the first person to perfect the
referral technique) are so prevalent--and why you should never make
investments based on tips, no matter how trustworthy the source.

While there is no way to know for certain whether a particular
investment will make money or lose money, there is one thing you can be
certain of: Any money you hand over to an investment swindler is lost the
moment you part with it. The question is, how do you check out someone who is
offering what sounds like an irresistible investment offer? Here are some of
the ways:

* Find out whether the local police department or Better Business
Bureau has complaints on file.

If so, you can make your investment decision accordingly. But be aware
that the absence of local complaints doesn't necessarily mean a firm or
individual is on the up-and-up. It may simply mean that investors haven't yet
become aware that they've been bilked. Or it may mean you will have the
distinction of becoming the first victim in town. It could also mean that
other victims have been too embarrassed to report their losses. Regrettably,
that's not uncommon.

* Make a phone call to the financial editor of your local newspaper.

Although newspapers don't give endorsements or make investment
recommendations, they may be aware of a swindler who is working a scam in the
area--and may even have published a warning article that you happened to
miss. Then too, if readers are being pitched with suspicious-sounding
investment offers, that's something an investigative reporter might want to
look into.

* If the investment offer isn't local, don't be reluctant to make a
long distance phone call or two.

It could be that the police, Better Business Bureau or newspaper in the
community where the offer is coming from will be able to provide information.
Again, however, even the absence of such complaints doesn't necessarily mean
the firm is legitimate. Some swindlers--particularly telephone boiler-room
operators--try to maintain a low profile in their local areas. That lessens
the likelihood of their coming to the attention of local authorities; it
prevents prospects from dropping by to see their operations; and it makes it
more difficult for out-of-towners to discover what they are up to.

* Check to see if your city or state has a consumer protection agency.

Many do. If so, there may be information there about the person or firm
that's offering the investment you are interested in. In any case, the agency
should be able to provide names, addresses and phone numbers of other places
you can check.

* Contact regulators.

The majority of individuals and companies offering investments to the
public are subject to some sort of regulation--and may be subject to multiple
regulation. Those which trade in futures contracts and options on futures contracts
are regulated by the Commodity Futures Trading Commission, a federal agency,
and by National Futures Association, an industry-wide self-regulatory
organisation authorised by Congress. In the securities and securities options
business, the federal regulatory agency is the Securities and Exchange
Commission. There is also an industry self-regulatory organisation, the
National Association of Securities Dealers.

The Federal Trade Commission has jurisdiction over advertising,
franchises and business opportunities. Deals involving interstate promotion
of land sales are regulated by the federal Department of Housing and Urban
Development.

By contacting the appropriate regulatory organisation, you can
generally find out whether the firm or person is properly registered to
engage in that type of business and whether any public disciplinary actions
have been taken against them. A list of some of the regulators you can check
with is provided on the inside back cover of this booklet.

* Write or phone law enforcement agencies.

Whether or not a person or firm is subject to the scrutiny of a
regulatory organisation, the fact is that fraud is against the law in every
state of the nation. And if it involves interstate commerce--including the
use of the mails or phone lines--federal criminal statutes apply. If an
investment sounds suspicious, check with the appropriate agency. They may be
able to furnish information or conduct an investigation of their own. The
following are some you could contact:

The office of the local public prosecutor, the state attorney general,
and the state securities administrator. Someone in the local courthouse
should be able to give you names, addresses and phone numbers.

If the mails are used in promoting or operating a phoney investment
scheme, federal Postal Inspectors want to know about it. The postmaster in
your community can put you in touch with them. Fraud involving any form of
interstate commerce is also of interest to the Federal Bureau of
Investigation. The nearest office should be listed in your phone directory.
The listing on the inside back cover of this booklet includes headquarters
addresses of the U.S. Postal Inspector in Charge and the FBI.

Sure it can take some time, effort and possibly expense to thoroughly
check out an investment proposal, but if you have any doubt about whether
it's worth the trouble, talk with people who didn't and wish they had!

Finally, Don't Lose Touch with Your Money

 

The need to exercise good financial sense doesn't stop once you've
decided to invest. It's possible, all your precautions notwithstanding, that
you may have turned your money over to a swindler. It's also possible that
what didn't start out to be a swindle may turn into one if the promoter finds
himself in financial trouble or with too many poor investments on his hands.
That can lead to cover-up bookkeeping or, worse yet, a decision by the
promoter to take flight with what's left of his customers' money.

It's important to continuously monitor your investments and to be alert
for any telltale signs that things aren't quite the way they should be. The
person who sold you the investment, for example, may suddenly become
inaccessible--continuously tied up on the telephone or unwilling to return
your calls, busy with clients, or out-of-town on important business matters.
Or various documents or accounting statements you were promised don't arrive.
Or information you do receive is vague or at variance from what you had been
led to expect. Or money that was supposed to have been paid to you isn't
received, and instead of checks you get excuses.

If you become suspicious or overly uncomfortable with an investment
you've made--and if you are unable to totally resolve your concerns--the best
thing you can do is try to get out of it. And do so as quickly as possible.
That means demanding your money back, accompanied, if necessary, by threats
to contact authorities.

You might or might not get it. The best you can hope for, if indeed
there's fraud involved, is that the swindler may decide to refund your money
rather than risk having you blow the whistle while he is still on the prowl
for new investors. If that happens, consider yourself more fortunate than
most.

Be aware, if you do decide to try and get a refund, that the person who
was smooth-talking enough to get your money in the first place will unleash
all his skills to persuade you to leave it with him. No doubt, he will have
some answer for all of your concerns. And some explanation for all apparent
irregularities. And, no doubt you will be told that backing out now would be
anything from contractually illegal to a terrible financial mistake.
Swindlers figure that every once in a while some of their more fidgety
investors simply have to be re convinced. He may tell you that you are so
close to making really big money, or the investment now looks even more
profitable than originally expected.

Believe him at your own peril.

If you do insist on a refund of your investment, insist on it
immediately Ask to pick it up yourself, or offer to pay the cost of having it
sent by overnight mail or wired directly to your bank. Don't settle for
"it will take a week or two" or "the check is in the
mail." As everyone knows, checks seem to be lost more often than any other
type of mail!

If you don't get your investment back (and chances are you won't), or
even if you do and still suspect a swindle, report it promptly to the
appropriate authorities and regulatory officials. They may be able to conduct
an investigation and, if called for, seek legal action to impound whatever
funds the firm still has.

Bottom line, the unfortunate reality is that very few victims of
investment fraud ever again see a cent of their money. It's also a reality
that the business of swindling will continue to flourish as long as unwary
investors provide prey for unscrupulous promoters. Hopefully, the information
in this booklet--if heeded--will help to assure that a swindler's next
fortune won't be made at the expense of your misfortune.

6/92

Below is a list of names, addresses and phone numbers of organisations
and agencies noted in this brochure:

Commodity Futures Trading Commission
2033 K St., N.W.
Washington, D.C. 20581
202.254.6387

Federal Bureau of Investigation
Justice Department
9th St. & Pennsylvania Ave., N.W.
Washington, D.C. 20535
202.234.3691

Federal Trade Commission
6th St. & Pennsylvania Ave., N.W.
Washington, D.C. 20580
202.326.3650

Housing and Urban Development Department
Interstate Land Sales Registration
HUD Building
451 7th St., S.W. Room 6262
Washington, D.C. 20410-8000
202.755.0502

National Association of Securities Dealers
1735 K St., N.W.
Washington, D.C. 20006
202.728.8044

National Futures Association
200 W. Madison, Suite 1600
Chicago, IL 60606-3447
Toll Free: 800.621.3570
In IL: 800.572.9400

Securities and Exchange Commission
450 Fifth St., N.W.
Washington, D.C. 20006
202.728.8233

United States Postal Service
Chief Postal Inspector
Room 3021
Washington, D.C. 20260-2100
202.268.4267

Copyright * 1987 by National Futures Association

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