Fraudsters Mimic Regulators

November 3, 2009
Michael Sheehan

The easiest way to sniff out an investment scam is to check with real regulators. The North American Securities Administrators Association and the SEC should be the first people you call.

If you have questions about a dubious investment offer, scammers may assure you that it’s been vetted by the appropriate securities regulatory agency and may even give you the name of the agency and a phone number to call. Unfortunately, the person on the other end of that phone call is probably in on the scheme, according to the Securities and Exchange Commission, and the agency is likely to be fictitious.

Fraud merchants may also copy the seal of a legitimate agency or create their own official-looking seal to put on letterheads and Web sites and may even claim that the investment has been “approved” by the SEC or other regulatory agency. Don’t be fooled, say SEC officials; no legitimate regulatory agency “approves,” or “endorses” any individual security or professional credentials. Your first step is to check out the investment with real regulators. You can find a list of regulatory agencies in the US, Canada, and Mexico at the North American Securities Administrators Association Web site. You can also get a list of fake brokers and bogus government entities from the SEC.

Keep in mind that legitimate brokers must be licensed to offer or sell securities, so another way to see if a deal is genuine is to verify the broker’s license and other credentials with the Financial Industry Regulatory Authority. In addition to providing plenty of sage advice for investors, FINRA has a BrokerCheck tool.