Whether it is to keep in touch with distant family members, or to keep up with the latest news, elderly Americans are beginning to use social media on a daily basis. This daily activity has also steered many senior investors to use social media to help make investment decisions. Web-based platforms that allow interactive communication, such as Facebook, YouTube, Twitter, LinkedIn, bulletin boards, and chat rooms, have become an important investment tool for researching particular stocks, investigating a financial professional's background, gathering up-to-date news on a company, or to discuss the markets with other investors. Although social media can provide many benefits, it also presents opportunities for fraudsters targeting senior investors. As a result, seniors need to proceed with caution when using social media in making their investment decisions.
The key to avoiding investment scams on the internet is to be an educated investor. Below are four tips to help senior investors avoid securities fraud:
•1) Look out for "Red Flags" - Whenever an investment touts "incredible gains" or "breakout stock pick," consider it to be a hallmark of extreme risk or outright fraud. Also, do not believe a promise of guaranteed returns with "no risk." Every investment entails some risk, which is reflected in the rate of return you can expect to receive. Moreover, you should carefully examine any unsolicited offer to invest outside the United States. Many fraudsters set up offshore operations to evade supervision by regulators. Last, do not be pressured into buying an investment before you have a chance to think about the opportunity, even if it is "once in a lifetime."
•2) Look out for "Affinity Fraud" - An investment pitch made through an online group of which you are a member may be an affinity fraud. Affinity fraud refers to investment scams that prey upon members of identifiable groups, often senior, religious, or ethnic communities, professional groups, or a combination of such groups. Even if you know the person, be sure to conduct a thorough investigation, no matter how trustworthy the presenter seems to be.
•3) Be Thoughtful about Privacy and Security Settings - Seniors who use social media as a tool for investing should be mindful of the various features on these websites that can help protect privacy. You must understand that unless you guard personal information, it may be available not only to your friends, but for anyone with access to the internet, including fraudsters.
•4) Ask Questions and Check out the Answers - Never judge a person's integrity, or the merits of an investment, without doing thorough research on both the person selling the investment and the investment itself. Investigate the investment thoroughly and check every statement you are told about the investment. You can use the SEC's EDGAR filing system to investigate investments, FINRA's BrokerCheck to check registered brokers, and registered investment advisers at the SEC's Investment Adviser Public Disclosure website.
In addition, some financial professionals are using social media to attract new clients. These financial professionals may use designations such as "senior specialist" or "retirement advisor" to imply that they are experts at helping seniors with financial issues. Therefore, investors are encouraged to always look beyond a financial professional's designation and determine whether he or she can provide the type of financial services or products needed. Investors should thoroughly evaluate the background of anyone with whom he or she intends to do business before handing over hard-earned cash.
Have you suffered losses resulting from an investment offering through a web-based social media platform? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.