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Affinity Fraud



Ten Questions To Ask About ....



 

Any Investment Opportunity

With any investment, whether promoted in person, by mail, telephone, or on the Internet, a wise investor should always slow down, ask questions, and get written information. Take notes so you have a record of what you were told, in case you have a dispute later.


1. Is the investment registered with the SEC and the state securities agency in the state where I live or is it subject to an exemption?

2. Is the person recommending this investment registered with my state securities agency? Is there a record of any complaints about this person?

3. How does this investment match my investment objectives?

4. Where is the company incorporated? Will you send me the latest reports that have been filed on this company?

5. What are the costs to buy, hold, and sell this investment? How easily can I sell?

6. Who is managing the investment? What experience do they have?

7. What is the risk that I could lose the money I invest?

8. What return can I expect on my money? When?

9. How long has the company been in business? Are they making money, and if so, how? What is their product or service? What other companies are in this business?

10. How can I get more information about this investment, such as audited financial statements?


Be Alert for Telltale Signs of Online Investment Fraud

• Be wary of promises of quick profits, offers to share "inside" information, and pressure to invest before you have an opportunity to investigate.

• Be careful of promoters who use "aliases." Pseudonyms are common on-line, and some salespeople will to try to hide their true identity. Look for other promotions by the same person.

• Words like "guarantee," "high return," "limited offer," or "as safe as a C.D." may be a red flag. No financial investment is "risk free" and a high rate of return means greater risk.

• Watch out for offshore scams and investment opportunities in other countries. When you send your money abroad, and something goes wrong, it's more difficult to find out what happened and to locate your money.

• If a company is not registered or has not filed a "Form D" with the SEC, visit the website of the North American Securities Administrators Association to find your state securities regulator.


Remember, if it sounds too good to be true, it probably is!

www.sec.gov


INVESTigate Before You INVEST!

• Download and print a hard copy of any on-line solicitation that you are considering. Make sure you catch the Internet address (URL) and note the date and time that you saw the offer. Save this in case you need it later.

• Don't assume that people on-line are who they claim they are. The investment that sounds so good may be a figment of their imagination, or they may be paid to promote it.

• Ask the on-line promoter whether – and how much – they've been paid to tout the opportunity.

• Ask the on-line promoter where the company is incorporated. Call that state's secretary of state and ask if the company is incorporated with them and has a current annual report on file. Also, check the SEC's EDGAR database.

• Don't believe everything you read on-line. Take the time to investigate a possible investment opportunity before you hand over your hard-earned money.

• Check with your state securities regulator or the SEC and ask if they have received any complaints about the company, its managers, or the promoter.

• Ask for other sources of information at your local public library. For example, there are resources that provide information about the company, such as a payment analysis, credit report, lawsuits, liens, or judgments.

• Before you invest, always obtain written financial information, such as a prospectus, annual report, offering circular, and financial statements. Compare the written information to what you've read on-line and watch out if you're told that no information is available.

• Don't assume that your access provider or on-line service has approved or even screened the investment. Anyone can set up a web site or advertise on-line, often without any check of its legitimacy or truthfulness.

• Check with a trusted financial advisor, your broker, or attorney about any investment you learn about on-line.


Have You Run Into A Problem?

Don't be embarrassed if you think you've been duped – you are not alone. Complain promptly. By complaining early you will have a better chance of getting your money back, protecting your legal rights, preventing others from losing money, and assisting securities regulators in stopping investment fraud.


Independently investigate the company or investment opportunity.

Be wary of anyone who encourages you to invest in small, thinly-traded stocks that aren't well known and don't file reports with the SEC. Assume that everything you read about those companies in an online bulletin board, newsletter, or chat room is untrue until you prove by your own independent research that it isn't. Read our tips for assessing any investment opportunity, and be sure to download a copy of Ask Questions.


Don't invest in small, thinly-traded companies unless you're prepared to lose every penny.

Because small, thinly-traded companies are usually the most risky investments that you can make, you should always get as much written information as you can from the company and other independent sources. The SEC and your state's securities regulator should always be your first stops, but you may also want to visit your local library and talk with the librarian about other sources of information. There are also a number of commercial services that provide a constant stream of information about the financial condition of companies.


Check with the SEC or your state securities regulator to see if the newsletter has ever been in trouble.

Whenever the SEC sues a newsletter or stock promoter, we issue a "litigation release" and post it on our web site. Check the Enforcement Division's home page to see whether we've brought action against a newsletter or stock promoter who's touting a stock. You can also search the SEC's non-EDGAR database for this information.


Your state securities regulator, which can be found at the website of the North American Securities Administrators Association, can tell you whether the broker pushing the stock or the broker's firm has a disciplinary history by checking the Central Registration Depository (CRD). To check the disciplinary history of the broker or firm that's touting the stock, use NASD's BrokerCheck website, or call NASD's BrokerCheck Program hotline at (800) 289-9999 .

www.sec.gov



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