The Top 10 Investment Scams

The North American Securities Administrators Association updated its list of the top 10 investment scams being investigated by state securities regulators. Sad to say in this era of mounting public distrust, some of the examples published by NASAA have involved accountants.

The top ten scams:

  1. Unlicensed individuals selling securities. The NASAA says the persons running these scams are usually independent insurance agents, but some have been investment advisers or accountants.

  2. Unscrupulous stockbrokers. Due to the declining market, the NASAA says some brokers may be cutting corners, while others are resorting to outright fraud. Investors are advised to scrutinize their brokerage statements for unexplained fees, unauthorized trades or other irregularities. Phony account statements have been used to cover up losses from unsuitable recommendations.

  3. Analyst research conflicts. In some states, securities analysts are being investigated to determine whether analysts issued glowing research reports and made "buy" recommendations in order to win investment-banking business.

  4. Promissory notes. These are short-term debt instruments often sold by independent insurance agents and issued by little known or non-existent companies promising high returns - upwards of 15 percent monthly - with little or no risk.

  5. "Prime bank" schemes. In these scams, investors are promised triple-digit returns through access to the investment portfolios of the world's elite banks. Sometimes they are promised access to the "secret" investments used by the Rothschilds or Saudi royalty.

  6. Viatical settlements. Originated as a way to help the gravely ill pay their bills, these interests in the death benefits of terminally ill patients are always risky and sometimes fraudulent.

  7. Affinity fraud. These scams use the victim's religious or ethnic identity to gain their trust. They range from "gifting" programs at some churches to foreign exchange scams targeted at Asian Americans.

  8. Charitable gift annuities. These annuities involve transfers of cash or property to a charitable organization. The difference between the value of the annuity and the value of the cash or property is treated as a charitable donation. While most annuities offered by charitable organizations are legitimate investments, investors should be cautious of little-known organizations or those that provide only sketchy information. As an example, NASAA describes a Ponzi scheme ran through a network of independent insurance agents, financial planners and accountants.

  9. Oil and gas schemes. These scams follow the headlines, rising in frequency with predictions of oil shortages or a rise in natural gas prices.

  10. Equipment leasing. While the majority of equipment leasing deals are legitimate, the NASAA points out that thousands of investors have been scammed by individuals selling interests in payphones, ATMs or Internet kiosks.

NASAA advises investors to call its offices before investing and ask if the individual selling the investment is licensed to do so. They say investors can also save themselves a lot of grief by asking a second question - whether the investment itself is registered. Telephone numbers for its local offices are in the white pages of your phone book under "government" and available at NASAA's Web site.

-Rosemary Schlank

You may like these other stories...

In need of CPE credits? Well, if you are an enrolled agent or CPA, you could earn as much as 18 credits by attending one of five IRS Nationwide Tax Forums this summer.The IRS Nationwide Tax Forums are three-day events that...
Russia races to dodge sanctions by adapting law to FATCARussia is in a race against the clock to adapt its laws to the Foreign Account Tax Compliance Act (FATCA) and save its banks from financial sanctions, Peter Hobson of...
Read more from Larry Perry here and in the Today's World of Audits archive.One of the most significant analytical procedures is reading, or scanning, the general ledger account activity. Whether it's done manually or...

Upcoming CPE Webinars

Apr 25
This material focuses on the principles of accounting for non-profit organizations' revenues. It will include discussions of revenue recognition for cash and non-cash contributions as well as other revenues commonly received by non-profit organizations.
Apr 30
During the second session of a four-part series on Individual Leadership, the focus will be on time management- a critical success factor for effective leadership. Each person has 24 hours of time to spend each day; the key is making wise investments and knowing what investments yield the greatest return.
May 1
This material focuses on the principles of accounting for non-profit organizations’ expenses. It will include discussions of functional expense categories, accounting for functional expenses and allocations of joint costs.
May 14
Save your relationship in those few situations where your performance falls far from perfect. It’s easy to want to brush service failures under the rug, hope no one notices and assume that somehow everything will be all right. In this workshop, Kristen Rampe, CPA will give you the tools to strengthen your professionalism in the face of the worst-case-scenario. Don’t let experience be your only teacher on these topics!