Investment Protections

Investment fraud refers to the use of deceptive practices to trick investors into making

harmful investing decisions. This can include misleading information or fictitious opportunities.

Typical investment fraud schemes involve low-risk investments and guaranteed returns. Every

investment involves some level of risk, and usually low-risk opportunities yield low returns.

Scammers may also pressure their victims to send money immediately by saying the offer will

be gone if they don’t act now. Resist the pressure and do your research!

To avoid investment fraud, do your own independent research before you invest and be

especially wary of unsolicited offers. Unsolicited emails, message board postings, or company

news releases should never be the only source of information for your investment decisions.

If you are the victim of investment fraud, the first thing you must do is collect documentation concerning the fraud. This includes a contact sheet of the perpetrator’s name, mail and email addresses, telephone numbers, and registration numbers if provided. You should also collect your most recent credit report and a timeline of events.

After you have collected your documentation, you should report the fraud to your federal

and state regulatory agencies for investment products. You should also file a report with law

enforcement so that the responsible parties are investigated and do not harm other investors.

The Securities Investor Protection Corporation (SIPC) is a nonprofit corporation that

protects brokerage firm clients who are forced into bankruptcy. All brokerage firms that sell

stocks or bonds to the public are required to be members of the SIPC.

Brokerage customers receive SIPC insurance that covers up to $500,000 in cash and

securities held by the firm. The coverage of cash is limited to $250,000. This means that if your

brokerage firm is a member of the SIPC and goes out of business, your cash and securities held

by the brokerage firm may be protected up to the limits listed. The SIPC protects any stocks, bonds, Treasury securities, certificates of deposit, mutual funds, or money market mutual funds that are held at an SIPC member firm. It does not protect investments in commodity futures, fixed annuities, currency, hedge funds, or investment contracts that are not registered with the SEC. In most cases, when a brokerage firm shuts down, customer assets are safe and are typically transferred to another registered brokerage firm. Hence, the SIPC does not usually need to step in. If the broker shuts down before you get your money back, you’ll be notified by a court-appointed trustee about how to file a claim with the SIPC.