PONZI SCHEMES: HOW TO DETECT AND AVOID THEM - Part 5

BEING ACCOUNTABLE

A red flag should go up with there has been unauthorized trades, missing funds or other issues on your account statements. True, this could be the result of a genuine error; however, it could also indicate the occurrence of fraud. Be sure to keep a close eye on your account statements in order to make sure it is consistent and is in alignment with your instructions.

Also, be sure to know exactly who is in charge of your assets. Note if the investment advisor is working as the custodian as well, which would make it easier for fraudulent actions to be commissioned. Confirm that your investment is being held with a reputable financial institution and that your money is, in fact, being held by them. Furthermore, verify that all of your accounts with the firm list your name and a specific account number.

Give a long look to the account statements being provided to you by the salesperson. It is to your benefit to be supplied with statements from the brokerage firm, third-party custodian or mutual fund company as well. The statements you receive from your promoter will offer some clarification on your investments, but should never be relied upon as the sole source for performance and trading information.

CONCLUSION

The tips in this article will greatly improve your chances of detecting and avoiding Ponzi scheme pitfalls. Truly take the time to research the investment transaction opportunity being offered and the individuals promoting them. Make sure that your funds are in good hands and be wary of anything that sounds too good. Protect yourself and your pocket from poisonous Ponzi promoters.

Gary Opper, CPA is the Managing Member of Levie-Opper, LLC, Weston, Florida. He is a member of the American Institute of CPAs and the Florida Institute of CPAs. He has written over 500 published articles in over 20 magazines. Mr. Opper has been the National Association of Mortgage Broker’s “Writer of the Year” and “Featured Writer of the Year.” He has spoken to many groups including the Florida Bar Association, the Florida Institute of CPAs, the Mortgage Bankers Association and Northern Trust Bank. He has lectured at four colleges including University of Florida and Florida International University. Opper has an Accounting degree from UF and a Master of Science in Taxation from FIU. Opper is Past President of the Florida Association of Mortgage Professionals - Miami Chapter and the FICPA - Gold Coast Chapter. Levie-Opper, LLC focuses on forensic accounting and fraud auditing. They handle state and federal cases including civil, commercial and criminal. Mr. Opper is available to speak to your group. He may be reached at (954) 384-4557, fax: (954) 384-5483, or e mail: Gary@Levie-Opper.com.

© Gary Opper. All Rights Reserved.

PONZI SCHEMES: HOW TO DETECT AND AVOID THEM - Part 4

PARTICIPATION

If you have already given a salesperson your money for an investment, do not provide additional funds or reinvest without seeing an initial return on your investments. Promoters easily keep their scams continuously going by convincing their investors to simply roll-over their preliminary profits with the promise of an even greater return. While it does make sense to follow through with the investment for a certain period of time, be suspicious of salespeople that are reluctant to let you cash out after the first sign of success.

A product that offers an overly consistent return is a cause for concern. Also, an investment with a rising return or that gives remarkably steady returns, regardless of the current market conditions, should be a cause for concern. Especially during these economic times, it is common for even the most solid investments to experience fluctuation from time to time. Be aware even if you receive funds back, they may be from other investors.

PONZI SCHEMES: HOW TO DETECT AND AVOID THEM - Part 3

WHO CAN YOU TRUST

A pushy salesman could indicate a less than reputable individual. No trusted salesperson should ever try and push you to make a quick decision about making an investment. The words “act now” are a clear indicator of something with which you should not be involved. If the investment is truly without fraud, there would be no reason to pressure you into getting involved.

The company that manages your investment should not be custodian of your investments. With this arrangement, you will receive periodic statements from a source independent from the manager/promoter.

PONZI SCHEMES: HOW TO DETECT AND AVOID THEM - Part 2

RESEARCH RIGHT

Do your homework! Spend some time investigating the background of the promoter. Ask the promoter which regulator has issued their license and if it has ever been suspended or revoked. Follow up on their response by speaking with your state, county or city securities office to locate the licensing/registration documents. The number for your state securities regulator can be found in the government section of your local phone book or by speaking with the North American Securities Administrators Association at (202) 737-0900.

It is important to know that anyone selling a security must have a license. A legitimate salesperson will be registered with the Financial Industry Regulatory Authority (“FINRA”), The Securities and Exchange Commission (“SEC”) or a state securities regulator. If the person claims to be exempt, you may follow up with your regulator’s office, but more than likely it is best to thank them for their time and walk away. The Financial Industry Regulatory Authority even offers a Scam Rating and Risk Rating Questionnaire at http://www.finra.org to assist in fraud evaluation. To verify a broker’s license and registration, including whether or not they have ever had a complaint filed against them, contact BrokerCheck at (800) 289-9999. Investment advisors can be verified by the SEC’s Investment Advisor Public Disclosure website at http://www.adviserinfo.sec.gov/IAPD/Content/Search/iapd_OrgSearch.aspx. Additionally, to check on an insurance agent, you can speak with your state’s insurance department, which can be located through the National Association of Insurance Commissioners (“NAIC”) at http://www.NAIC.org. Individuals that are sellers should be investigated through your state securities regulator.

Request an onsite visit to the advisor to see the company’s operations and meet with their employees. A Ponzi scheme promoter will not want his fraudulent behavior exposed so they will most likely have very few to no employees. Be wary of someone that opens their own mail and answers their own calls, as it lessens their likelihood of being caught in a scam. Also, note that when the perpetrator is close to being exposed, it will be more difficult to get in touch with them.

PONZI SCHEMES: HOW TO DETECT AND AVOID THEM - Part 1

Knowing how to detect and avoid Ponzi Schemes will help you to avoid fraudsters’ clutches. With more and more scams occurring in our society, it is wise to be aware of how to avoid their traps. By following the tips in this article, you will have a greater chance at sidestepping the Ponzi pitfalls.

THE BIG BAD WOLF

Be wary of any financial transaction that sounds too good to be true. Donald Trump has said, “Some of my best investments were ones I didn’t make.” The easiest way to spot a Ponzi scheme is if you are being offered lofty promises that come with guaranteed profits. With any legitimate business investment there is a degree of risk that makes it impossible to be assured of a profit, let alone one that comes with such a high rate of return as Ponzi Schemes do.

The promoter should be able to provide you with clear and easily explainable details. Anyone that claims there is no simple explanation for their investment is to be avoided. Many individuals that commonly fall into these scams do not have a basic understanding of the subject transaction.

Ask the promoter for a detailed clarification of the investment in writing. As an investor, of course you have the right to receive information on the venture since you will be placing a substantial amount of money in it. Inquire about receiving information on the company, the officers and their financial records. For the product being offered, ask the salesperson for documents regarding cost, fair market value and the existing and potential markets.

Often times a Ponzi promoter will solely rely on their ability to speak quickly and offer documents that appear to be official. Anyone that is reluctant to provide you with the requested data should indicate to you to be very cautious.