The Financial Industry Regulatory Authority (FINRA) has unveiled two new online tools designed to help investors spot and resist investment fraud.
The Scam Meter and the Risk Meter are designed to help investors evaluate the investments they're being offered and determine whether their own personality characteristics make them more vulnerable to investment fraud.
The Scam Meter asks the user a series of questions about the investment he or she is considering to determine whether that investment might be too good to be true. The Risk Meter asks 12 questions about the user's behavioral traits to determine if he or she shares characteristics that have been shown to make some investors vulnerable to investment fraud.
FINRA also has issued an Alert that examines in detail specific tactics con artists employ, including the "Phantom Riches" tactic, which dangles the prospect of wealth, and the "Scarcity" tactic, which creates a false sense of urgency by claiming there is a limited supply of the investment product available.
It also provides links to online tools investors can use to check the background of investment professionals — including brokers, investment advisers or insurance agents — investigate investments they are considering and file a complaint if a problem occurs.
"Recent financial frauds have robbed victims of their life savings and livelihoods," said John Gannon, FINRA's Senior Vice President for Investor Education and President of the FINRA Investor Education Foundation. "FINRA Foundation fraud prevention resources have been proven to reduce susceptibility to investment fraud. Using these tools can help investors shut the door on any con artists who might come knocking."
The Alert also outlines a series of red flag warnings, advising investors to be suspicious of investments that:
• Offer guarantees that the investment will perform in a certain way;
• Are not registered, including unregistered stocks, bonds and hedge funds;
• Deliver overly consistent returns, regardless of market conditions; or
• Credit complex investing techniques for their unusual success
