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Investment Seminar Fraud

Trading or investment seminars can provide a great deal of information, but they also provide the opportunity for fraudulent schemes. These schemes can lead investors to lose significant amounts of money when stockbrokers or financial advisors use seminars or a “free lunch” to promote fraudulent trading schemes or promote bogus investments and Ponzi schemes. In some cases, those committing investment fraud can be held responsible through legal action in securities arbitration or court.

Indications of Fraud

Fraud can occur when those individuals speaking at a trading seminar claim that they can share trading strategies that will result in fast and easy money. Often, promoters will use false or misleading statements that entice investors to purchase expensive products. According to an Investor Alert published by the Securities and Exchange Commission (SEC), the following are some of the signs of potential fraud:

  1. Trading strategies that are explained as being easy or simple: these types of statements are untrue as securities trading takes place within complex financial markets;
  2. Guaranteed returns: promises that a certain level of return will occur are a red flag because all trading in securities carries some level of risk. Further, higher rates of return are usually tied with higher levels of risk. Promoters may commit fraud by guaranteeing high return rates, without discussing the associated risk; and
  3. High pressure sales tactics: promoters may use this tactic to push investors into buying their products without researching them or giving it sufficient thought. This can be accomplished by claiming that supply is low or that purchasing immediately will result in the greatest return rate. Others can use contact information gathered during the seminar to later contact the investors directly.

Steps to take to Avoid Fraud

According to the SEC, investors who are interested in attending a trading seminar should always research the people or company hosting and presenting the seminar. Further, any products or classes of stock being sold or discussed at the seminar should also be thoroughly researched before any purchase is made. Specifically, investors should be searching for whether the individuals involved in the seminar have any history of complaints against them, fraudulent behavior, or criminal activity. Tools such as the Financial Industry Regulatory Authority (FINRA) BrokerCheck website and the SEC Investment Adviser Public Disclosure website can provide information about the speakers.

Another way to protect against fraud is to question promoters and speakers. Investors should ask questions about the trading strategies being discussed, such as how much money will learning and implementing the strategy cost and the risks involved. The speaker should be willing and able to answer questions asked by investors. Further, the speaker should provide a balanced discussion between the potential benefits and risks of the strategy being promoted. The SEC has prosecuted multiple cases where investors at free lunch seminars have been sold expensive training courses or promised unrealistic returns on an investor’s money.

Finally, caution should be taken when a speaker at a trading seminar discusses past success. Speakers will often claim that a “former student” used his or her methods and enjoyed great rewards as a result. They may even have the former student speak at the event. However, the purported record may contain false or misleading information, so those claims should be verified by the investor. Further, past success is not an indicator of future performance.

Newspapers in affluent communities like Palm Beach, Florida are littered with ads promoting trading seminars or free lunches discussing investment ideas. These educational seminars are frequently used by con artists to educate themselves about potential investors.  These seminars are particularly popular in retirement communities or areas with a large percentage of seniors willing to take advantage of a free educational seminar or a good meal.  However, elder financial abuse is on the rise and FINRA has reported multiple securities arbitration claims relating to investor losses from seminars hosted by financial advisors touting unsuitable investments.

Protection for Investors

If you believe that your investment losses have occurred because of the misconduct of an investment professional, contact an experienced securities law attorney today. At the Silver Law Group, we represent investors in securities arbitration and mediation proceedings, as well as in state and federal court.

 

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