How to spot
a con artist
Investing your money
is risky enough without
worrying about whether
your salesperson, or anyone
offering investments, is out
to fleece you.
Be an informed investor.
Know how to spot a con
and a con artist.
Some are subtle. Some
are easier to spot.
Warning sign #1: Con artists blend in.
Con artists know that being themselves
hurts business, so they disguise their true
motives. Con artists will take great pains
to look, sound, and speak like you and,
coincidentally, will have similar interests.
This is their way to befriend you and get
you to trust in them. Once that occurs,
the con begins.
Warning sign #2: Con artists dress for success ... or not.
Con artists will work hard to be smooth and to appear professional and
successful. Or they may look like the guy or girl next door in more casual
wear. Some may operate from expensive-looking offices – or give you the
impression that they do. (Their address may be nothing more than a mail
drop or, in the case of an e-mail, a generic or personal address.) Some
may impress you via the phone or e-mail and sound like a “high-roller,”
but then meet you at a nonprofessional, retail location. If this strikes you
as odd, do not make a deal.
Warning sign #3: Con artists often
push confusing financial products.
Determining the best financial product for you
can be confusing given the variety and wide
range of investments. It’s no wonder that many
people turn to financial advisers for guidance.
Con artists know this and stand ready to
assume full responsibility for your investment
decisions. They may purposely confuse you
and then say “let me worry about the details.
You just worry about how you’re going to
spend all the money that you earn from this
Warning sign #4: Con artists bring out your worst fears.
Skilled con artists will draw upon any insecurity and fear you have. They will
try to make you feel inadequate if you do not believe them. They will tell you
they feel slighted if you lack confidence in them. Similarly, they may instill
fear in you if you complain of a failed investment and warn you that it will
“rock the boat” for other investors.
Warning sign #5: Con artists are fair-weather friends.
Before you invest, con artists are very friendly. They are interested in you,
return your calls, and generally make you feel good about your financial
decisions. Often, they will be your “defender” against those who, according
to them, are unwilling to make a deal successful. But, once you have
invested your money, contact with the con artists dwindles and then usually
stops altogether. If you cannot get answers to your questions following your
investment, this may signal danger.
Warning sign # 6: For every silver lining, there is a cloud.
Every investment involves risk, but con artists will wave away any concerns
by saying, “This is too good to pass up.” Look out if you hear claims such as:
“I just got a hot tip from an inside source that this stock will go
through the roof.”
“The rumor on the street is that this deal is ready to take off.”
“Your return is guaranteed. There’s no way you can lose money.”
“Everyone else who invested in this did very well.”
Warning sign #7: Watch out for the Ponzi scheme.
Ponzi schemes come in all forms — it can be an investment in real estate
or even gold. But every Ponzi scheme carries the same characteristic:
investment returns are paid to initial investors out of the funds of later
investors. This gives the first investor confidence and motivates others to
invest. Unfortunately, the later investors usually lose most, if not all, of
their money. Ponzi operators also tend to persuade you to “roll over” your
“profits” into yet another investment, so your return ends up only on paper.
Warning sign #8: Steer clear of pyramid schemes.
Pyramid schemes are a variation of the Ponzi scheme. Think of a pyramid.
Money is collected from people on the bottom to pay off other individuals
farther up the pyramid. As more people invest, new pyramid levels are
created and your position in the pyramid rises. In theory,
you would be entitled to more money. Many times, you
must also buy a product to join. However, unlike a true
multi-level marketing plan, selling the product is less
important than recruiting others to join the network.
Ultimately, there comes a time when no new money flows
in. When this happens, the pyramid collapses.
Now that you know what a con artist looks like and does,
here are tips to help you avoid falling prey to one:
Tip #1 Make sure whoever is selling you an investment (security) is properly
licensed in Oregon and the investment is properly registered. Contact our
office – the Oregon Division of Finance and Corporate Securities – or go
online to check our database of licensed investment advisers and
Be wary if the seller does firms that operate in Oregon. We can tell you if the salesperson has
not ask you about your a disciplinary history – that is, if civil, criminal, or administrative
financial history, such as proceedings have been brought against the salesperson or the firm.
your existing investments We also have access to the Financial Industry Regulatory Authority
and your goals. (FINRA) database to indicate if a broker firm and its representatives
are licensed to do business in Oregon, and the U.S. Securities and
Exchange Commission’s (SEC) database containing investment advisers not
regulated by Oregon.
Tip #2 Ask for written information on the investment product or the business. Such
information, including financial data on the company and the risks involved
in the investment, is contained in a prospectus. Read it carefully.
Tip #3 Do not take everything you hear or read at face value. Ask questions if you
don’t understand, and do some sleuthing. If you need help evaluating the
investment, consult a trustworthy independent resource, such as an attorney
or an accountant.
• Don’t make investment-related decisions based solely on your emotions.
• Never give someone control of your purse strings just because you think
you are too financially inexperienced, too old, or too young.
Tip #4 Steer clear of investments touted as having no downside or risk, or that are
described as “guaranteed.”
Need a speaker? A Financial Information Program representative is available
to speak to your community group and organization at no charge.
Contact the Oregon Division of Finance and Corporate Securities
at 1-866-814-9710 (toll-free in Oregon) or
find helpful information online at
Our e-mail address is firstname.lastname@example.org.
Division of Finance and Corporate Securities
350 Winter St. NE, Room 410 • Salem, Oregon 97301-3881
440-3219 (1-13 COM)