Experts warn of 10 investment threats for 2008

Benjamin Dow has heard the stories too often.

An individual learns of an enticing investment opportunity, with dreams of earning thousands of dollars on its future earnings. In the end, that person has invested hundreds of dollars only to learn later that he or she had fallen for a scam.

Dow, an associate professor of finance at Southeast Missouri State University, said Missourians interested in investing should be leery of people approaching them with a promising offer. Instead, Dow said, they should go through credible investment firms who hold such certifications as Chartered Financial Analyst and Certified Financial Planner.

"My general advice is to look hard at their credentials," Dow said. "But above all, individuals should use common sense and be cautious of a deal that's too good to be true. Because chances are, it is too good to be true."

Pam Abercrombie agrees.

"Do your homework," said Abercrombie, a Certified Financial Planner with Capaha Bank in Cape Girardeau. "Because an investment normally involves a significant amount of money, it pays off to do research on the person you hired to invest your money for you. If they are promising extensive returns on the investment, then chances are it's probably not the way to invest your money."

To that end, the Missouri Securities Division has released a list of top threats to Missouri investors for this year using data from investigations, enforcement actions and discussions with nationwide agencies.

"Since many con artists try to prey on investors' fears about their financial security, it is important to educate Missourians about common types of fraud and threats to investors so they can protect their hard-earned money and spot a scam before it is too late," Missouri Secretary of State Robin Carnahan said in news release Wednesday. "Also, when in doubt, investors can always contact my office to check out an investment and the people offering it to make sure both are properly registered."

The following list details the top 10 threats to investors living in Missouri:

1. Senior specialists. People may identify themselves as senior specialists in order to create a false comfort level among the elderly and, as a result, will entice them to invest.

2. Unlicensed sellers and unregistered products. If a person sells securities without a valid securities license, this should cause concern for the potential investor. Carnahan said con artists attempt to bypass state registration requirements to pitch unique or unusual investments. In the end, investors suffer from a lack of information.

3. Complimentary meal offers. These con artists often target seniors with an invitation for a free meal in exchange for attending a retirement or investment seminar. Carnahan said investigators in the Missouri Securities Division open new cases monthly involving "unsuitable investments that started with nothing more than a free lunch."

4. Real estate investment schemes. People who promise large returns from certain real estate investments are on the rise, promising little risk for the investment. Many times, these offers are pitched as low-risk for a guaranteed-investment gain. "But real estate investment contracts can involve significant risk, and like other investments, they are often subject to full regulation under the state and federal securities laws," Carnahan said.

5. Internet fraud. The World Wide Web has become a valuable tool in society, but it also has served as a way for con artists to use the tool for their next scheme. "Fraudsters are using social networking Web sites to lure people to meetings that may promote fraudulent investment products," Carnahan said. "Other con men are using the Web to pump up the value of low-priced stocks which are then dumped on naive investors who purchase the securities at inflated prices."

6. Variable and equity indexed annuities. Carnahan said investments combining features of insurance, annuities and mutual funds normally are not suitable for older investors. They include above-average fees and access limits on the funds unless the investor agrees to pay surrender fees.

7. Oil and gas scams. A sharp increase in energy costs has created such energy-related scams. Carnahan cautions against schemes that promise new technological developments to increase energy consumption efficiency.

8. Gold, precious metals and foreign currencies. While it is becoming more common to invest in gold, precious metals and foreign currencies in light of the decreasing value of the dollar, Carnahan's office said those investments may not be suitable for all investors. "It can be expensive to locate, acquire, pay taxes on, and store gold bars or other tangible gold items," Carnahan said. "Foreign currency trading is highly speculative."

9. Auction rate securities. Dishonest individuals may treat these as cash deposits or money market accounts. However, investors who transferred funds into this method of investment are discovering they are unable to access their money when needed most.

10. Prime bank schemes. Con artists using this method promise high, tax-free returns in elite overseas banks. However, Carnahan's office said such banks do not exist and con-artists only intend to create a profit for themselves.

If an individual has fallen for an investment scam, Abercrombie said seek legal help immediately.

"If you can catch the mistake early, chances are you may be able to reverse it," she said. "Most people may be too embarrassed to admit their mistake but the last thing you want to do is let them hurt others."

bblackwell@semissourian.com

335-6611, extension 137

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