Kathleen G. Kane - Pennsylvania Office of Attorney General - Protecting Pennsylvanians

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ASK THE ATTORNEY GENERAL: How can Pennsylvania seniors avoid investment scams?

Seniors are being targeted with complex investment scams that promise great returns in short periods of time because of the fact that people over the age of 50 control over 70% of the nation's wealth.  These scams not only affect the seniors who are preyed upon but they affect their families as well.  While investing money for the future is important, there are some precautions to take before dishing out your life savings.

What types of investment scams should I look out for?
There are a few different patterns of investment schemes targeted at seniors.  They include:

  • "Free lunch" seminars, where seniors are encouraged to purchase complex goods and services with provisions in the contract promising guaranteed death benefits.
  • Convincing seniors to purchase ultra-short bond funds and equity-indexed annuities as low-risk alternatives to money markets or insured certificate of deposit.
  • "Ponzi" or pyramid schemes where money from investors is used to pay off earlier investors until the entire scheme collapses, leaving the investment worthless.
  • "Living trust" scams where misinformation and misunderstanding about probate and estate taxes help convince seniors to send their money to be placed in the trust but the scam artists never set up such a trust.

How can I avoid these types of scams?

  • Investigate the investment before you buy.  Never make an investment without doing research to verify that the statements you have been told about the investment are in fact true.  Do not rely on the seller's representations of the investment's value.
  • Do not fall for investments that promise huge profits or guaranteed returns.  If the investment sounds too good to be true, it usually is.
  • Be aware of any investment that is said to have no risks because very few investments are indeed risk-free.  Promises of large gains in short periods of time are classic warning signs of fraud.
  • Avoid investments that are not in writing.  Most legitimate investments are in writing.
  • Invest in opportunities in which you are familiar.
  • Be leery of mailings and seminars that induce the purchase of estate planning documents and annuity products.  Ask questions and do research before becoming involved in these products.
  • Talk to you family, an attorney, or someone whose financial advice you trust.  It is important to have others with knowledge help you in making these financial decisions.  Remember, your financial decisions may have consequences that affect your family in the future.

What do I do if I think I've invested into one of these investment scams?

Do research on the investment and talk with your family, attorney, or financial advisor.  If you still feel that the investment was a scam, talk to the seller and attempt to get your money back.  If the matter is not resolved, file a complaint with the Pennsylvania Attorney General's Bureau of Consumer Protection at www.attorneygeneral.gov or call the toll-free hotline at 1-800-441-2555.

Do securities sales persons or the company have to be licensed?
The Pennsylvania Securities Act of 1972 prohibits fraudulent practices relating to securities, and requires the broker-dealer companies and Investment Adviser firms and their agents or representatives to be licensed through the PA Securities Commission. The Commission offers a FREE background check of a firm or individual. Go to www.psc.state.pa.us/investor/check_invest.html or call toll free 1-800-600-0007.

Other Resources
PA Securities Commission www.psc.state.pa.us
PA Department of Insurance www.ins.state.pa.us
U.S. Securities and Exchange Commission www.sec.gov