Minnesota Attorney General's Office
1400 Bremer Tower
445 Minnesota Street
St. Paul, MN 55101
(651) 296-3353
(800) 657-3787
M - F 8 am - 5 pm
TTY:(651) 297-7206
TTY:(800) 366-4812
Avoid Investment Scams
If it sounds “too good to be true,” it is. Don’t be tempted by a persuasive sales pitch or the lure of “high guaranteed returns.” Any investment is risky, and high returns come with more risk—not guarantees. Don’t be lured by the promise of above market rates with little risk, something which does not exist!
Don’t invest money you can’t lose. The people most hurt by scam investments are those who mortgage their houses, use limited savings, or incur credit card debt to make the investment. Before you make an investment ask yourself: can you afford to lose the money you are investing? Don’t risk losing your home—or burdening yourself and your family with a life-time of paying off high interest credit card debt—because of a bad investment.
Research, research, research. Prior to investing, you should carefully research the person or company making the investment. The Minnesota Department of Commerce regulates the sale of securities in Minnesota. You should contact the Department of Commerce at 651-296-2283 to check the license of a securities agent, broker-dealer or investment advisor and determine if any enforcement actions have been taken against the licensee or if the individual is improperly operating without a license. Other entities that may have useful information include the Federal Trade Commission (www.ftc.gov), the Financial Industry Regulatory Authority (www.finra.org), the Commodities Futures Trading Commission (www.cftc.gov), and the Securities and Exchange Commission (www.sec.gov). An absence of complaints about an entity, however, does not mean that it is legitimate, nor does a great brochure or snazzy web site.
Get it in writing. Get any promises in writing and review the documents carefully. A scam artist may tell a good story, but then give you disclosures in writing about the risk of the investment to limit your ability to recover for fraud. Or, a scam artist may refuse to put anything in writing. Make sure that you receive and keep copies of everything you sign or are given. You should question investments that don’t have detailed financial documents, and be especially wary of any individual who asks you to invest without providing detailed copies of your investment. Show the written materials to a trusted advisor before you invest.
If you have to keep the investment a secret, you are likely being scammed. If you are asked to sign a confidentiality agreement to preclude you from seeking advice from an independent advisor, you should be on high alert about the legitimacy of the investment. Always consult with your own independent advisors.
Don’t give in to time-pressures. A common tactic used by fraudsters is to pressure an investor to invest immediately or risk losing the “opportunity of a lifetime.” Don’t be pressured into making an investment without taking the time to do your homework and analyze whether a particular investment is right for you.
Be cautious of overseas investing. If you invest directly overseas, you may not have any legal recourse if someone takes your investment. Don’t fall for “prime bank” or “high yield investment program” schemes in which scammers offer to let the average person invest in overseas banks, which they claim are limited to select traders or top world financiers. These scammers will tell you that you need to pool your funds with others to participate in this investment. They often will have investors sign non-disclosure agreements and claim that legitimate banks will deny the existence of these programs.
Beware of Promissory Notes. A promissory note is basically just an IOU in which the investor agrees to loan money to an organization for a fixed period of time. In exchange, the organization promises to pay the investor a fixed return on his or her investment.
Promissory notes are extraordinarily risky and not a safe investment for most ordinary citizens. Resources.
Resources. The Minnesota Department of Commerce and the Securities and Exchange Commission have the authority to regulate sellers of investment products. People with questions about a given seller, practice, or who would like to file a complaint, may contact these agencies as follows:
Minnesota Department of Commerce
85 East Seventh Place, Suite 500
Saint Paul, MN 55101
(651) 282-5064
1-800-657-3602
www.commerce.state.mn.us
Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549-0213
1-800-SEC-0330
www.sec.gov
You may obtain additional information from the Federal Trade Commission, the Commodities Futures Trading Commission, and the Financial Industry Regulatory Authority by contacting these entities as follows:
Federal Trade Commission
Consumer Response Center
600 Pennsylvania Avenue NW
Washington, D.C. 20580
Toll free: 1-877-382-4357
www.ftc.gov
United States Commodities
Futures Trading Commission
Three Lafayette Center
1155 21st Street, NW
Washington D.C. 20581
1-866-366-2382
www.cftc.gov
questions@cftc.gob
Financial Industry Regulatory Authority
District 4
12 Wyandotte Plaza
120 West 12th Street, Suite 800
Kansas City, MO 64105-1930
(816) 421-5700
www.finra.org
For more information, or to file a consumer complaint, contact the Minnesota Attorney General’s Office as follows:
Office of Minnesota Attorney General Lori Swanson
1400 Bremer Tower
445 Minnesota Street
St. Paul, MN 55101
(651) 296-3353
1-800-657-3787
TTY: (651) 297-7206
TTY: 1-800-366-4812
