A GUIDE FOR

SENIORS

Protect yourself against 

investment fraud

U.S. SECURITIES AND EXCHANGE COMMISSION | 1

How to Avoid Fraud

Seniors are often the target of fraud. However, with 

some basic understanding of how scam artists work, 

you can avoid fraud and protect your hard-earned 

money. Learning how to invest safely can make a huge 

difference in your retirement years.

Seniors are particularly vulnerable to scam artists who 

are “nice” or attempt to develop a false bond of friendship. Scam artists prey on seniors who are polite and 

have difficulty saying “no” or feel indebted to someone 

who has provided unsolicited investment advice.

What Can I Do to Avoid Being Scammed?

■ Ask questions and check out the answers.

Fraudsters rely on the fact that many people simply

don’t bother to investigate before they invest. It’s not

enough to ask a promoter for more information or for

references—fraudsters have no incentive to set you

straight. Savvy investors take the time to do their own

independent research and talk to friends and family

first before investing. Make sure you understand the

investment, the risk attached, and the company’s

history. And remember, if the investment sounds too

good to be true, it is!
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■ Research the company before you invest.

You’ll want to fully understand the company’s business

and its products or services before investing. Before

buying any stock, check out the company’s financial

statements by using the SEC’s EDGAR database

(www.sec.gov/edgar.shtml), or contact your state

securities regulator. Remember that unsolicited emails,

message board postings, and company news releases

should never be used as the sole basis for your investment decisions.

■ Know the investment professional.

Spend some time checking out the person touting the

investment before you invest—even if you already

know the person socially. Always find out whether the

person who contacts you is licensed to sell securities

in your state and whether he or she or their firms have

had any trouble with regulators or other investors. You

can check out the disciplinary history of an investment

professional quickly—and for free—at Investor.gov.

■ Never judge a person’s integrity by how he or

she sounds.

Successful con artists know how to sound professional.

They can make even the flimsiest deal sound like a

“sure thing.” Con artists know that the appearance

of professionalism combined with polite manners or

overtures of friendship may lead many older investors

to accept their advice.
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■ Watch out for investment professionals who prey 

on your fears. 

Con artists know that many seniors worry about the 

adequacy of their retirement savings, especially if they 

are faced with costly medical expenses. As a result, 

fraudsters often pitch schemes offering unrealistically 

high rates of return. 

■ Take your time—don’t be rushed into investment 

decisions. 

Just because someone you know made money, or 

claims to have made money, doesn’t mean you will too. 

Be especially skeptical of investments that are pitched 

as “once-in-a-lifetime” opportunities, particularly when 

the promoter bases the recommendation on “inside” 

or confidential information. Remember that a fraudster 
4 | A GUIDE FOR SENIORS

does not want you to think too much about the investment because you might figure out the scam. 

■ Be wary of unsolicited offers. 

Be especially careful if you receive an unsolicited phone 

call or email about a company—or see it praised on 

an Internet bulletin board—but can find no current 

financial information about the company from other 

independent sources. Many fraudsters use email 

and Internet postings to tout thinly traded stocks, in 

the hopes of creating a buying frenzy that will push 

the share price up so that they can sell their shares. 

Once they dump their stock and quit promoting 

the company, the share price quickly falls. And be 

extra wary if someone you don’t know recommends 

foreign or “off-shore” investments. When you send 

your money abroad, and something goes wrong, it’s 

more difficult to find out what happened and to locate 

your money. 

■ Don’t lose sight of your investments. 

Don’t rely on an investment professional who says 

“leave everything to me.” Always monitor the activity 

on your account and request regular statements. You 

should never feel uncomfortable about questioning any 

trading activity that you don’t understand. Remember—

it’s your money. 
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■ Question why you cannot retrieve your principal 

or cash out your profits. 

If your investment professional stalls when you 

request your principal or profits, this may be because 

that person has already pocketed your money. Don’t 

be fooled by explanations as to why your money is 

inaccessible or by suggestions that you roll over your 

“profits” into other investments. 

■ Never be afraid to complain. 

If you suspect fraud or a questionable practice and 

the explanations that you receive are not satisfactory, 

do not let embarrassment or concern that you will be 

judged incapable of handling your own affairs prevent 

you from filing a complaint with the SEC, FINRA, or your 

state securities regulator. 

Where to Call for Help 

SEC: (800) 732-0330 

To Find Your State Regulator: (202) 737-0900

FINRA Securities Helpline for Seniors: (844) 574-3577
6 | A GUIDE FOR SENIORS

Here Are Some Red Flag Warnings 

of Fraud: 

■ If it sounds too good to be true, it is. Compare 

promised yields with current returns on well-known 

stock indexes. Any investment opportunity that claims 

you’ll get substantially more could be highly risky. And 

that means you might lose money.

■ “Guaranteed returns” aren’t. Every investment 

carries some degree of risk, and the level of risk 

typically correlates with the return you can expect 

to receive. Low risk generally means low yields, and 

high yields typically involve high risk. If your money is 

perfectly safe, you’ll most likely get a low return. High 

returns represent potential rewards for folks who are 

willing and financially able to take big risks. Most fraudsters spend a lot of time trying to convince investors 

that extremely high returns are “guaranteed” or “can’t 

miss.” Don’t believe it. 

■ Beauty isn’t everything. Don’t be fooled by a pretty 

website—they are remarkably easy to create.

■ Pressure to send money RIGHT NOW. Scam artists 

often tell their victims that this is a once-in-a-lifetime 

offer, and it will be gone tomorrow. But resist the 

pressure to invest quickly, and take the time you need 
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to investigate before sending money. If it is that good 

an opportunity, it will wait. 

Con artists are experts at gaining your confidence. 

So be certain to treat all unsolicited investment 

opportunities with extreme caution. Whether you 

hear about the “opportunity” through an email, phone 

call, or the mail, be certain to check out both the 

person and firm making the offer and the investment 

they are pushing.
8 | A GUIDE FOR SENIORS
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Types of Fraud 

“Ponzi” and Pyramid Schemes 

These investment scams are essentially “robbing one 

person to pay another.” Initial investors are paid off 

with money taken from new investors. As long as a 

steady flow of new investors keeps coming in, there 

will be money to pay off the old investors. This early 

return on investment is misleading, however, because 

when the new investors stop coming in, the scheme 

collapses, investors lose their money, and the fraudsters walk away rich. 

Oil and Gas Scams 

If you think you’ve found the right oil or gas investment 

to “strike it rich,” consider this: it may be a scam. While 

some oil and gas investment opportunities are legitimate, many oil and gas ventures are frauds. Many of 

these schemes start in so-called “boiler rooms,” where 

skilled telemarketers use high pressure sales tactics to 

convince you to hand over your hard-earned money. 

The oil and gas industry is often in the news, and this 

publicity can be used to lure potential investors and 

make “opportunities” sound legitimate.
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Promissory Notes 

A promissory note is a form of debt—similar to a loan 

or an IOU—that a company may issue to raise money. 

Typically, an investor agrees to loan money to the 

company for a set period of time. In exchange, the 

company promises to pay the investor a fixed return on 

the investment.

While promissory notes can be legitimate investments, those that are marketed broadly to individual 

investors often turn out to be scams. Investors 

should be careful to determine their legitimacy and 

should seek the advice of an objective third party 

when in doubt. 

Prime Bank Fraud 

In a prime bank scheme, fraudsters often claim 

investors’ funds will be used to purchase and trade 

“prime bank” financial instruments or other “high yield 

investment programs” (“HYIPs”) on offshore markets in 

order to generate huge returns in which the investor 

will share. However, neither these instruments, nor 

the markets on which they allegedly trade, exist. To 

give the scheme an air of legitimacy, the promoters 

distribute documents that appear complex, sophisticated and official. The sellers frequently tell potential 

investors that they have special access to programs 

that otherwise would be reserved for top financiers 
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on Wall Street, or in London, Geneva or other world 

financial centers. 

High Return or “Risk Free” Investments 

Some unscrupulous investment professionals make 

unsuitable recommendations to purchase investment 

products that don’t meet the investment objectives or 

means of an investor. Unsuitable recommendations 

might occur when a broker sells speculative investments such as options, futures or penny stocks to a 

95-year-old widow living on a fixed income with a low 

risk tolerance. Investors should be careful to review 

the risk profile of each investment recommendation and seek the advice of an objective third party 

when in doubt. 

Internet Fraud 

Internet investment frauds mirror the frauds perpetrated over the phone or through the mail. Remember 

that fraudsters can use a variety of Internet tools to 

spread false information, including bulletin boards, 

online newsletters, spam, or chat rooms. They can also 

build a glitzy, sophisticated web page. All of these tools 

cost very little money and can be found at the fingertips 

of fraudsters.
12 | A GUIDE FOR SENIORS

“Senior” Specialists and 

Advisors 

What You Should Know about Professional 

Designations

Some investment professionals use designations such 

as “senior specialist” or “retirement advisor” to imply 

that they are experts at helping seniors with financial 

issues. However, this may not always be the case. 

The education, experience, and other requirements 

to obtain and maintain a “senior” designation vary 

greatly. In some cases, an investment professional may 

need to study and pass several rigorous exams—after 

working in a designated field for several years—to 

receive a particular designation. In other cases, it may 

be relatively easy in terms of time and effort to receive 
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a “senior” designation, even for an individual with no 

relevant experience. 

If you want to find out more about a particular 

professional designation, check out the “Understanding 

Investment Professional Designations” page on FINRA’s 

website (http://www.finra.org/investors). The page 

provides the education and experience requirements 

for many professional designations. In addition, you can 

find out whether the granting organization for a particular designation requires continuing education, offers 

a public disciplinary or investor complaint process, or 

provides a way to check the status of an investment 

professional. Keep in mind that neither FINRA nor the 

SEC endorses any professional designation.

Even after doing some research, it may not be clear 

to you whether a professional designation represents 

legitimate expertise, a marketing tool, or something 

in between. That’s one reason you should always look 

beyond an investment professional’s designation and 

determine whether he or she can provide the type of 

financial services or product you need. 

We encourage you to thoroughly evaluate the 

background of anyone with whom you intend to do 

business—before you hand over your hard-earned cash. 

You also should ask questions—that’s the best advice 

we can give you about how to invest wisely. We see too 

many investors who might have avoided trouble and 

losses if they had asked basic questions from the start.
14 | A GUIDE FOR SENIORS

Where to Go for Help 

SEC Office of Investor Education and 

Advocacy

If you encounter a problem with an investment or have 

a question, you can contact the SEC’s Office of Investor 

Education and Advocacy at: 

U.S. Securities and Exchange Commission

Office of Investor Education and Advocacy 

100 F Street, NE 

Washington, DC 20549-0213 

Telephone: (800) 732-0330 

Fax: (202) 772-9295 

You also can send us an online complaint form 

(www.sec.gov/complaint.shtml) or email us at 

help@sec.gov. 

Investor.gov 

Investor.gov—the SEC’s website designed for individual 

investors—includes a section specifically for seniors 

(Investor.gov/seniors). There you will find resources to 

help you understand some of the investment products 

often marketed to seniors and how to avoid investment fraud.
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You can order copies of the publications and 

brochures listed below on Investor.gov. The publications are available in both English and Spanish and are

available for download. 

•Ask Questions: Questions You Should Ask About 

Your Investments 

• Saving and Investing: A Roadmap to Your Financial 

Security Through Saving and Investing 

•Mutual Funds and Exchange-Traded Funds: A Guide 

for Investors 

• Stopping Affinity Fraud in Your Community 

Additional SEC Resources 

Our online search tool at Investor.gov allows you to 

check the registration status and background of investment professionals. 

If you have been a victim of a scam, you can check 

the SEC’s website (www.sec.gov/litigation.shtml) 

for information about SEC actions and investor 

claims funds. 
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State Regulators 

While the SEC regulates and enforces the federal securities laws, each state has its own securities regulator 

who enforces what are known as “blue sky laws.” 

These laws cover many of the same activities the SEC 

regulates, such as the sale of securities and those who 

sell them, but are confined to securities sold or persons 

who sell them within each state. 

In addition, your state securities regulator can tell 

you whether the investment is registered and whether 

the investment professional and his or her firm are 

licensed to do business in your state. Your state 

regulator also can check their disciplinary history. 

You can find out the name of your state securities 

regulator by visiting the website of the North American 

Securities Administrators Association, Inc. (NASAA) at 

nasaa.org or by calling (202) 737-0900. In addition, 

NASAA’s website includes investor information devoted 

to seniors at ServeOurSeniors.org.

The Office of Investor Education and Advocacy has provided 

this information as a service to investors. It is neither a 

legal interpretation nor a statement of SEC policy. If you 

have questions concerning the meaning or application of a 

particular law or rule, please consult with an attorney who 

specializes in securities law.

SEC Pub. 187 (7/17)