Leveraged and inverse exchange traded funds and green technology scams are among the traps that could catch investors trying to rebuild their damaged portfolios, according to the North American Securities Administrators Association’s annual list of products and practices that deserve special scrutiny.
In NASAA’s 2010 list, it singles out products such as leveraged and inverse ETFs, which it says may contain hidden traps and complexities, and may consist of highly leveraged bundles of exotic financial instruments; currency and foreign exchange trading schemes, which can involve high commissions; gold and precious metals schemes; green technology scams, including those related to the Gulf of Mexico oil spill clean-up; and oil & gas scams.
Dubious practices on the list include affinity fraud, which involves abusing membership or association with a religious or professional group to convince potential investors to trust the legitimacy of an investment; undisclosed conflicts of interest; fraudulent private offerings; “off the books” deals that are sold on the side rather than through a broker’s employer; and unsolicited online pitches.
Denise Voigt Crawford, NASAA president and Texas Securities Commissioner, warned that investors seeking to rebuild their nest eggs damaged by the market collapse, and investors frustrated with low interest rates, are particularly susceptible to speculative investments that often fail to deliver.
“Knowledge, attention to detail and a healthy sense of skepticism are a triple threat to fight investment fraud,” Crawford said. “State and provincial securities regulators provide detailed background information about those who sell securities or give investment advice, as well as about the products being offered. The more you are prepared, the better your chance of sidestepping a trap that can leave you in a financial hole for many years.”
IE
Top investor traps include leveraged ETFs, affinity fraud
Investors frustrated with low interest rates are susceptible to fraud, NASAA warns
- By: IE Staff
- August 3, 2010 August 3, 2010
- 11:00