2008 INVESTOR FRAUD TRAPS PART 1

Updated: 10/12/2008 10:15
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Whether youre an angel investor listening to startup pitches or an innovator considering funding sources, now is a time to be extra careful

Whether youre an angel investor listening to startup pitches or an innovator considering funding sources, now is a time to be extra careful with anything related to money, credit, lending or capital of any kind ? especially if youre a participant in a social or affinity network or if youre transparent with your blog and other online participation (which give scammers lots of ammo to use to pitch you).

The Minnesota Department of Commerce just released this 2008 Investor Fraud Traps listing (in alphabetical order) and offer it as a warning:

Deficient Disclosure: The recent investigations by state securities regulators related to auction-rate securities (ARS) have reinforced that investors should remain cautious when pitched complex investment products accompanied by deficient disclosures or when advised to concentrate their investments too heavily in one investment product. It is best to avoid investment pitches that would lead you to put all of your eggs in one basket, especially if its a basket you dont fully understand.

Energy Scams: The substantial increase in energy costs has made scams related to energy more prevalent. State and provincial securities regulators are seeing not only shady oil and gas investments, but also scams that promise the development of new technologies to increase the efficiency of energy consumption or to extract energy from sources previously thought too expensive to develop.

Online Affinity Fraud: In a new twist on affinity and online investment fraud, Tyler said NASAA members are concerned that unscrupulous individuals are trying to use social networking websites to lure people to meetings that may promote fraudulent or unsuitable investment products. Social networking websites create an environment ripe for affinity fraud, Tyler said. Fraudsters can take advantage of the fact people freely share information with both their real and ?virtual friends by posting it to their profile, Tyler said. Communication tools provided by some social networking websites make it easy to advertise and promote investment scams to a wide audience for free. Investors need to do their own research before making an investment and should not simply rely on ?expert advice given at a seminar or meeting.

Prime Bank Schemes: Promises of receipt of astronomical profits from vehicles that execute off-shore trades of foreign bank debentures only available to very wealthy people and cloaked in secrecy are the securities equivalent of a purse snatch. They simply do not exist, and once money is handed over, it will never be recovered.

Private Securities Offerings: Con artists are turning increasingly to private securities offerings under Rule 506 Regulation D of the Securities Act of 1933 to attract investors without having to go through the full registration process. Although sometimes legitimate, these offerings are often associated with fraud. Also, proceed with caution when encouraged to invest in general partnership or limited liability companies. Speculative deals often are packaged as such in an attempt to evade the consumer protection requirements of state and federal securities laws.


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Abby Anderson is a a multi-skilled copywriter with good all-round writing and creative expertise. She is a very capable professional with an ability to identify and then deal with a clients needs and then translate them into crisp, compelling, creative and informative copy. Experienced in providing motivation & guidance to colleagues to produce copy write for products that will have a real impact on the lives of people. Abby has excellent interpersonal skills, she is a good communicator, emotionally mature with calming and positive temperament and understanding disposition.
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