Common Scams to Watch Out For

Resources for Reporting Fraud

Your investment approach should change as you grow older to fit your changing needs. If you are an older Iowan in retirement, you also are a prime target for con artists because you have built up a lifetime’s worth of savings.

Be wary of con artists who will take advantage of this period of change in your finances or changes in the financial markets. During times of uncertainty and change, investment scammers come out in force.

Iowans need to take the time to double-check investment offers with the Iowa Insurance Division to verify whether the adviser is licensed and the offer is legitimate.

Martha-Jo Ennis, a retired schoolteacher from Marion, Iowa, said she never understood how anyone could fall for an investment scheme until it happened to her — and she lost her retirement savings and an inheritance from the sale of her farm to a Ponzi scheme.

One call to the Iowa Insurance Division would have let Ms. Ennis know the licensed investment adviser was under review and was later convicted and sentenced for security fraud.

Always double-check before you make an investment and report any suspected investment or insurance fraud to the Iowa Insurance Division to help friends and neighbors from becoming victims.

As an Iowa Fraud Fighter, you have pledged to be an informed protector of your savings. Being aware of the investment scams to watch out for will help you outsmart the scammers and shield your savings. Here are a few of the most common investment scams circulating in Iowa.

Affinity fraud targets identified groups such as religious or ethnic communities. Affinity fraud is a common investment scam to watch out for. Scammers begin by targeting a leader or respected member and using that member’s influence to attract more investors in a pyramid-type scheme.

The seminars are often advertised in local newspapers, on websites or through mass-mailed invitations or emails. Many of these seminars are used to sell investment products at the seminar or through later communications. Be wary if guilt, fear or high-pressure tactics are used to try to sell products.

These are always risky investments. It may be a scam if the seller wants you to invest in gold mining or to purchase gold or other precious metals, which will be delivered to a secured facility. Be sure the company is genuine and ensure the gold or precious metal you purchase does exist.

These products are peddled by scammers claiming to have access to the world’s leading financial institutions or banks. The scammers promise high returns at little or no risk to you by enrolling you in an elite or secret investment venture, often called a prime bank investment.

These ventures are always high risk and should be researched carefully to avoid scams, especially those claiming a specific well is guaranteed to produce high returns or have attractive tax advantages.

These schemes promise high returns, often “guaranteed” for investors, but collapse when new investors can’t be found. Scammers use funds from new investors to pay off the initial investors. Each group of new investors is used to pay off an earlier, smaller group of investors, while the majority of the money disappears into the scammer’s pocket at the top of the pyramid.

Also called Regulation D, Rule 506 offerings, these can be used by small companies to raise funds. These offerings are unregulated and are often risky investments or scams.

These notes are used by companies to raise money by selling debt, typically paying a high interest rate, to an investor. Con artists often sell promissory notes for companies that do not exist, so always check that a company is legitimate before purchasing these.

Fraud often occurs when a scammer misrepresents the responsibilities of self-directed IRA custodians by falsely suggesting that your investment is protected or that your self-directed IRA custodian will investigate the investment offer for you.

Arm Yourself with Knowledge of Common Scams

Learn how to avoid and report fraud.

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