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Top 10 Threats to Investors

Consumers lose billions of dollars every year to investment fraud. It touches all segments of society, every level of income, and every age. Investors are lured by the promise of high returns or huge tax savings with little or no risk. Sounds too good to be true? Well, it usually is. Far too many investors plunge into investments without first investigating them. The same scams are used over and over again on people who do not take the time to check out the offers or learn the danger signs.

The Securities Division is a division of the Office of Secretary of State. This office regulates investments sold in Missouri and the people who sell them - stockbrokers, financial planners and the companies they work for. If you would like to check the registration of the promoted investment, inquire about the licensing status and possible disciplinary history of an investment professional, or if you need to file a complaint, contact the Secretary of States' Office, Securities Division's Investor Protection Hotline at 1-800-721-7996

Top 10 Threats for 2007

[ Download Top Ten Threats to Investors, 2007 pdf file ]

  1. Free Lunch or Dinner Offers: These meetings often target seniors by inviting them to investment, retirement or tax planning seminars. Along with the free meal often comes the promise of investments with “high returns and little or no risk.” Our investigators see new cases every month involving unsuitable investments that started with nothing more than a free lunch.

  2. “Senior Specialists”: Individuals may call themselves “senior specialists” or use professional sounding designations to create a false level of comfort among seniors and then get them to invest. Often, the only specific training they have is on how to sell to seniors.

  3. Real Estate Investment Schemes: Investments in real estate are often viewed as a “sure thing” with little downside risk. But putting your money into real estate investment contracts can involve significant risk, and, like other investments, they are often subject to full regulation under state and federal securities laws. Be aware that investment scams featuring real estate are on the rise.

  4. Variable and Equity-Indexed Annuities: Complicated investments that combine features of mutual funds, annuities and insurance are often unsuitable for older investors. These usually include higher than normal fees and can limit your ability to access your money for many years unless you’re willing to pay “surrender fees.” Older Missourians should be especially cautious about investing in variable annuities or equity-indexed annuities.

  5. Oil and Gas Scams: Rising oil and natural gas prices have made a variety of traditional and alternative energy projects attractive to investors. Many of these investments are highly risky and not appropriate for smaller investors.

  6. Con Artists / Affinity Fraud: Con artists sometimes become friendly with members of a group, civic organization or even a church group. After earning trust, they ask people to invest money in their schemes. This is known as affinity fraud.

  7. Unsuitable Recommendations: Securities professionals are obligated both to know their customers’ financial situations and to avoid unsuitable investment recommendations. But advisors can earn higher commissions on certain products, so they don’t always adhere to the suitability standards.

  8. Unlicensed Sellers & Unregistered Products: The sale of securities by someone without a valid securities license should be a red flag for investors. Con artists try to bypass stringent state registration requirements to pitch unusual investment ideas like viatical settlements and pay telephone and ATM leasing contracts.

  9. Prime Bank Schemes: These often promise high, tax-free returns. Promoters of these schemes offer to let the “little guy” in on what they claim are exclusive investments from elite overseas banks. Don’t be fooled. Prime banks of this type do not exist, and scam artists have no intention of creating a profit for anyone but themselves.

  10. Investing in Death Benefit Contracts / Viaticals: Buying the “death benefit” of a life insurance policy, also known as a “viatical,” has become a growing issue. Brokers sometimes sell the life insurance policy of a terminally ill patient for a price below what is promised to be paid upon death. They claim the investor can collect the full value of the policy’s death benefit when the policy holder dies. Needless to say, advances in medical technology are keeping people alive longer than ever, so these schemes should not be considered to offer a guaranteed return.


Missouri Securities Division
Investor Protection Hotline: (800) 721-7996
General: (573) 751-4136   Facsimile: (573) 526-3124
600 West Main Street
Jefferson City, MO 65101Driving Directions