How To Protect Yourself From Investment Fraud
Last week I had the opportunity to attend a program conducted by the Pennsylvania Department of Banking and Securities where the subject, interestingly, was Recognizing and Reporting Elder Investment Fraud and Financial Exploitation Prevention.
While the speaker, who is Assistant Counsel for the Department, limited herself primarily to those aspects of investment fraud as handled by her department, attorneys could not resist exploring related subjects of financial abuse and scams especially those directed toward seniors but some apply to those of any age.
The speaker specifically mentioned recent problems with non-traded REIT’s (Real Estate Investment Trusts) and their sale of limited partnership interests. Although income can be obtained, the speaker indicated that the initial investment would not be recovered unless the investment went public or cashed out – a problem for those like seniors who cannot handle a very long term investment.
Also flagged as a possible consideration for inappropriate investment by a senior were market-linked CDs, which may be known as indexed, structured or equity-linked CD’s that may be tied to a variety of indexes.
To obtain more information about the Department and its activities, you might explore their website at www.dobs.pa.gov. There is, by the way, on the www.dobs.pa.gov website information regarding filing complaints and other useful information. Note, however, that the Department has limited jurisdiction and some complaints might more appropriately be referred to other Departments either in state or federal government.
In this regard I was reminded of a recent matter our office handled where an annuity described as a single premium deferred annuity was sold to someone of advanced age that would not be able to be surrendered without substantial penalties until the consumer was well into her 90’s – a matter within the jurisdiction of the Pennsylvania Department of Insurance. With proper information and arguments we were able to obtain a very satisfactory result. However, we thought of others who had been exploited who did not have this opportunity.
These products too commonly have been sold to seniors who are without other sizeable resources and without investment experience. Although the agent who understands grafici borsa must complete a disclosure to protect from inappropriate sale, the disclosure might state that the purchaser has experience that just does not exist.
Some exploitation unfortunately also comes from friends and family and some family and friends also sell inappropriate products, sometimes innocently. They may themselves be unaware of the downside so it pays to be aware and cautious.
Here are some recommendations to prevent financial exploitation and fraud.
- Before investing, research the company and product and determine whether there are any “flags” from agencies that police this type of product or this type of company. It may take some time to research but anyone who insists that this investment is a one time opportunity or time is of the essence should be considered with some suspicion.
- Do not assume that a product is appropriate for you simply because it is offered by a well established company or institution or recommended by a friend. Even where the company offering the product has been in business for a considerable time and even if the product is appropriate for some investors, it might not be appropriate for you. Again, research the background and become informed regardless who is offering the product.
- If an investment opportunity looks too good to be true, it likely is. This observation is common knowledge. You must have heard it before.
- Consider how much you can safely invest and diversify. It is a good idea to think of your investments in “baskets.” You need some emergency savings, some immediate cash, some liquid assets and some long term. If you are encouraged to invest everything you have in one product, you need to consider whether this makes sense for you.
- Develop a relationship with someone you trust based on actual experience. If you find a good investment advisor, begin by asking questions – lots of them. A good investment advisor will be pleased to answer your questions. This does not mean the market would not take a downturn but the person you are dealing with should be considering your own best interests.
- Monitor your funds and involve your trusted family member.
You want to save both for today and the future.
About the Author Janet Colliton
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.