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EXCEPTIONAL AND ACCESSIBLE LEGAL REPRESENTATION ACROSS KENTUCKY AND NATIONWIDE

3 questions to ask to avoid investment fraud

On Behalf of | Jan 20, 2025 | Securities Law And Litigation |

Investment fraud can make you lose millions of dollars. While some frauds can be very well hidden using tactics that appear legitimate, asking questions can help you detect red flags in an investment opportunity.

Below are three questions to ask:

1. What is the investment?

Obtain more information about the specific investment and the potential risks and tolerance. A legitimate brokerage firm should provide you with a document with in-depth details about the investment. 

You should be concerned if you are having a difficult time getting adequate information about an investment from a firm or if the information it gives is too good to be true, for instance, if it states the investment is risk-free.

2. Are you registered with FINRA?

An investment firm and its individuals must be registered with the Financial Industry Regulatory Authority (FINRA) to conduct securities transactions and business with the investing public. 

A broker-dealer that sells securities to the public must also be registered with the U.S. Securities and Exchange Commission (SEC) and the state regulator in each state where it intends to conduct business.

3. Where is my money going?

Before investing, ask a firm where the money you wish to invest will go. What is the actual price of the security itself, and how much will go to associated fees, such as commissions?

You should also know if your funds will be invested in opportunities outside your state. You want to know if factors in another jurisdiction can affect your investment. Another factor to learn more about is who will be auditing the funds and the kind of report you will be receiving.

The above questions can protect you from being involved with investment fraudsters. If you have already invested with a brokerage firm and believe it deceived you, consider legal guidance to determine the best way forward. 

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