Have you been invited by someone you know through social media to join a group so you can get in on a “guaranteed great investment opportunity”? Before you turn over your hard-earned money, read on for information from the U.S. Securities and Exchange Commission (SEC) on how to recognize and report investment fraud and financial scams. Hearing Health Foundation (HHF) spoke with the SEC’s Charu Chandrasekhar and Owen Donley.
HHF: When and how did you become aware that investment schemes and fraud are a problem within Deaf and hearing loss communities?
Chandrasekhar: Historically, the SEC’s Enforcement Division has brought cases where large investment fraud schemes targeted individuals in Deaf and hearing loss communities as victims of fraud. We have a strong interest in encouraging investors to understand what to look out for, and importantly from an enforcement perspective, to report suspicious investment schemes and professionals.
HHF: Can you describe how Deaf and hearing loss communities may be targets of fraud?
Chandrasekhar: The tactics we’ve seen include fraudsters soliciting investors by posing as, or recruiting people from, trusted parts of social networks like family, friends, or community members. We’re also aware that some fraudsters take advantage of the use of social media within these communities to target potential victims who may be socially isolated in other ways. The Deaf and hearing loss communities overlap with many of the other groups on which we’re also focused, such as seniors, active military, and veterans. Some fraudsters may view members of these groups as vulnerable to their tactics.
Donley: Yes, unfortunately, fraudsters may be, or pretend to be, part of a group that they’re trying to take advantage of by using a common bond to build trust. When fraudsters target victims based on their membership in a group or community, we refer to it as “affinity fraud.” Our office has an Affinity Fraud section on the Investor.gov website. It’s only natural to want to trust someone with whom you have something in common, but that’s exactly what fraudsters are counting on.
Even if you know the person offering you an investment opportunity, check out the person’s background and be sure the person is a currently registered investment professional. You can easily find this information by typing the person’s name into the red search box on Investor.gov. It’s a great first step to protecting your money.
HHF: Can you share some of the main warning signs that individuals should be looking for when they’re approached with investment possibilities?
Donley: A guaranteed high investment return is a hallmark of fraud. High returns generally involve high risk. If someone guarantees you astronomical returns with no risk, the person is lying. Investors should remember that if an investment sounds too good to be true, it probably is. Investors should be wary of unregistered or unlicensed sellers and high-pressure sales tactics. Finally, investors should be skeptical if they are asked to use a credit card or wire money abroad to invest.
HHF: What if you’re asked to join an investment group, whether online or in person, and told that time is running out on your chance to be part of the investment?
Donley: Often fraudsters claim to have limited opportunities available or limited time left to make you feel like you’re at risk of missing out. You should take the time to do your own independent research of the investment opportunity and should not feel rushed into making these types of important decisions.
Chandrasekhar: Whenever you’re considering an investment or have chosen to invest, keep detailed records of your communications. Save emails, marketing materials, and statements, and make notes of your conversations. These may be helpful to you if you report potential misconduct to the SEC.
HHF: How can investors figure out whom to trust?
Donley: I can’t tell you whom to trust, but I can tell you whom not to trust. If anyone offering you an investment misrepresents his or her background, steer clear. You can use the tools on Investor.gov to see if the seller is currently registered and if the seller has any disciplinary history.
Chandrasekhar: Bottom line: If you’re offered an investment opportunity, or hear about a friend or loved one who is getting solicited to make an investment—and if anything about the investment or the seller seems too good to be true or doesn’t seem quite right—please report it to the SEC.
This article originally ran in the Fall 2019 issue of Hearing Health magazine. Charu Chandrasekhar is the chief of the SEC Enforcement Division’s Retail Strategy Task Force. Owen Donley is the chief counsel of the SEC’s Office of Investor Education and Advocacy. For references, including direct links to report fraud and to read press releases about prior cases, see hhf.org/fall2019-references. The Securities and Exchange Commission disclaims responsibility for any private publication or statement of any SEC employee or Commissioner. This article expresses the authors’ views and does not necessarily reflect those of the Commission, the Commissioners, or other members of the staff.