With the Bernard Madoff Ponzi Scheme now over the SEC is under intense scrutiny. Regardless of what truths are revealed there are precautions any investor can take to help identify a possible investment scam.
The most common investment scams are those investors find in their emails. Quick rich schemes such as “This stock is ready to surge 30,000% in three weeks” are often read and ignored, but suspecting someone everyone trusts and respects is another story.
A recent article from the Motley Fool offers 10 tell-all questions to consider:
- Does it promise “low risk and high gain?”
- Will it be “too late” if you don’t act now?”
- Does it claim to predict the future?
- What is the background of the salesperson and his/her employer?
- Does it “guarantee” anything?
- Has the salesperson offered to reimburse you for any losses you might incur?
- Are you one of the “lucky few who have been chosen” to invest in XYZ company?
- Does the salesperson claim to have personally invested in the company, too?
- Is the salesperson unwilling to supply a prospectus or financial statements?
- Is the salesperson’s information “a hot inside tip?”
The latest update with the Madoff case is Christopher Cox, Chairman of the SEC, is being questioned today on Capital Hill to find out how could he and his team possibly overlooked Madoff. The SEC reportedly had investigated Madoff atleast eight times in the past yet missed the bigger picture. Quite the Quandary.
Investing Scams: 10 Tell-All Questions
Motley Fool Staff
Fool.com, December 31st, 2008, 8:54 AM EST