09/04/11 One Of Greenwich Roundup's Financial Advisers Preston Leigh Warns Us About Scams

Post Maddof crocks are alive and well. AdvisoryOne released the following article. Many legitimate investment offerings are available in these areas; however, scammers are also presenting schemes in these areas. Take extra precautions:

1. Distressed Real Estate - While many legitimate investment offerings are tied to real estate, investment pools targeting distressed real estate have become increasingly popular with con artists as well as investors.

2. Energy Investments - Swindlers continue to attempt to trick investors by using high-pressure marketing tactics touting the mystique associated with untapped oil and gas reserves and bountiful production runs.

3. Gold and Precious Metals - Higher precious metal prices and the promise of an ever-appreciating, “tangible” asset have lured unsuspecting investors into a variety of scams. Many recent schemes are variations on old themes: a promoter seeking capital for extraction equipment to reopen a long dormant mine in exchange for a full refund plus interest and a stake in the mine.

4. Promissory Notes - Investors seeking safety in uncertain economic conditions or those enticed by the promise of big returns through a private, informal loan arrangement may suffer deep losses investing in unregistered or fraudulent promissory notes. These notes give investors a false sense of security with promises or guarantees of fixed interest rates and safety of principal.

5. Securitized Life Settlement Contracts - Life settlement contracts are investments in the death benefits of insurance policies that insure the lives of unrelated third parties. Legitimate investments in life settlement contracts involve a high degree of risk, and investors may be responsible for routinely paying costly premiums for policies that insure people who outlive their life expectancies. Outside the legitimate offerings, crooks are embracing new schemes to deceive even cautious investors.

6. Affinity Fraud - Marketing a fraudulent investment scheme to members of an identifiable group or organization continues to be a highly successful and lucrative practice for Ponzi scheme operators and other fraudsters. The most commonly exploited are the elderly or retired, religious groups and ethnic groups.

7. Bogus or Exaggerated Credentials - State regulators are noting an increase in the use of bogus credentials or exaggerated designations. State securities regulators have encountered salesmen pitching financial services or products with nonexistent law degrees or CPA certificates and expired or nonexistent CRD numbers.

8. Mirror Trading - The securities market is constantly evolving to provide investors with new products, different platforms and a variety of choices. The latest evolution is “mirror trading,” which is promoted as an automated trading platform that ensures investors will participate in real-time transactions placed or executed by a skilled and knowledgeable third party.

9. Private Placements - There are legitimate private placements which are exempt from registration under Rule 506. In the case of legitimate issuers, private placement offerings are highly illiquid, generally lack transparency and have little regulatory oversight. In the United States, the federal exemption for private placement offerings provided under Rule 506 of Regulation D continues to be abused by criminals.

10. Securities and Investment Advice Offered by Unlicensed Agents - State securities regulators have identified a consistent increase in investor complaints regarding salesmen unlicensed as securities brokers or investment advisors giving investment advice or effecting securities transactions.

Preston Leigh
914-523-7367