Watch out for these investment scams in 2020

Traditional Ponzi schemes are joined by newfangled crypto scams and social media frauds in the list of top investor threats for 2020 from the North American Securities Administrators Association (NASAA).

The group of U.S. state and Canadian provincial regulators published its top five products or schemes that are targeting investors for the coming year.

The list includes traditional threats, such as Ponzi/pyramid schemes, promissory notes and real estate investments, along with newer schemes involving crypto investments and investment frauds deployed via social media.

The list was compiled from a survey of the state and provincial securities regulators, and is based on investor complaints, ongoing investigations and current enforcement trends.

“It is important for investors to understand what they are investing in and who they are investing with. Don’t fall for promises of guaranteed high returns with little to no risk or deals pitched with a false sense of urgency or limited availability,” said Christopher Gerold, president of NASAA and chief of the New Jersey Bureau of Securities.

NASAA said that investments that sound “too good to be true” often share similar characteristics. The most common red flag is guaranteed high returns with no risk.

“Anyone who says their investment offer has no risk is lying,” Gerold said. “No one can guarantee an investment return.”

The regulators noted that many of the top threats facing investors involve private offerings.

“Unregistered private offerings generally are high-risk investments and don’t have the same investor protection requirements as investments sold through public markets,” Gerold said.

The regulators also stressed that investors should determine whether investments and their sellers are registered.

“For the same reasons you wouldn’t go to an unlicensed doctor or dentist, you should avoid unregistered investment salespeople and their products. Anyone offering to sell a security without a license is breaking the law and should be avoided,” Gerold said.

“Before you ring in the New Year, make a resolution to protect your money from fraudulent investments and those who may be trying to fleece you,” he concluded.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.