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Investigate Before You Invest

May 24, 2000|INDRANEEL SUR

Scam artists pushing phony investments can be very aggressive in their pitches on the telephone, through the mail or on the Internet. State regulators say it's always best to take a step back and ask a few questions before trusting someone else with your money.

* Who is this salesperson? Be especially cautious about purported investment advisors who call you "cold" on the telephone, arrive uninvited at your doorstep or send you materials you did not request. Always ask to see credentials, and even then check with the appropriate credentialing agency to determine whether the salesperson is legitimate.

* Where are these high returns coming from? To entice investors, people selling fraudulent securities often promise returns of more than 10% on your money over short periods of time. Always question how the person making you an offer will earn high returns. A high return usually requires taking on a high level of risk.

* Where's the proof--in writing? Avoid salespeople who cannot back up claims about the investment product they are offering with documents outlining risks, legal authorization and historical performance. And be skeptical if they do present such documentation. Anyone can publish a slick brochure or put up an elegant site on the Internet.

* What's the reputation? Promises about "hot start-ups" may vanish into thin air. If someone offers you securities or notes connected to a company, do some research. Local libraries and state regulators have directories of licensed investment advisors and legitimate firms.

* What's the rush? Don't reach for your checkbook or credit card until all your questions are answered. Resist efforts to push you into buying something because the salesperson says it's a "once-in-a-lifetime" opportunity.

* Resources available: The Los Angeles office of the California Corporations Department can be reached at (213) 576-7505. The department's Internet site is at

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