FINRA Unveils Tools to Spot Scams

The online tools—a Scam Meter and a Risk Meter—will help investors evaluate the investments they’re being offered and determine whether their own personality characteristics make them more vulnerable to investment fraud, according to a press release from FINRA. The Scam Meter asks the user a series of questions about the investment he is considering to determine whether that investment might be too good to be true; and the Risk Meter asks 12 questions about the user’s behavioral traits to determine if he shares characteristics that have been shown to make some investors vulnerable to investment fraud.

FINRA also said it released an Investor Alert, Avoiding Investment Scams, which explains the characteristics of the most commonly used securities frauds, including Ponzi and pyramid schemes, pump-and-dumps, and offshore scams. The Alert provides links to online tools investors can use to check the background of investment professionals, investigate investments they are considering, and file a complaint if a problem occurs.

The Alert outlines a series of red flag warnings that investors should be suspicious of. The red flags include funds that:

• offer guarantees that the investment will perform in a certain way;
• are not registered, including unregistered stocks, bonds, and hedge funds;
• deliver overly consistent returns, regardless of market conditions;
• credit complex investing techniques for their unusual success.