P R E PA R E D B Y T H E O F F I C E O F I N V E S T O R E D U C AT I O N A N D A D V O C A C Y

A GUIDE FOR SENIORS PREPARED BY THE OFFICE OF 

INVESTOR EDUCATION AND ADVOCACY

A GUIDE FOR SENIORS 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 mean a huge difference in your 

retirement years.

Seniors are particularly vulnerable to tactics of scam artists 

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

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 product sounds too 

good to be true, it is!
2 OFFICE OF INVESTOR EDUCATION AND ADVOCACY

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 at www.sec.gov/edgar/

searchedgar/webusers.htm, 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. 

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 securities salespeople 

who contact you are licensed to sell securities in your state 

and whether they or their firms have had any troubles with 

regulators or other investors. You can check out the disciplinary history of brokers and advisers quickly—and for free—

using the online databases of the SEC and the Financial Industry Regulatory Authority (FINRA). Your state securities 

regulator may have additional information.

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.

Con artists know that many seniors worry about the adequacy of their retirement savings, especially if they are faced 

Know the salesperson. 

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

sounds. 

Watch out for salespeople who prey on your fears. 
A GUIDE FOR SENIORS 3

with costly medical expenses. As a result, fraudsters know 

to pitch their schemes as a way to increase the older investor’s financial security to the point where such fears are no 

longer necessary.

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 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 fax 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, faxes 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 and trust recommends foreign or “offshore” 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 a financial professional who says “leave everything 

to me.” Always monitor the activity on your account and request 
4 OFFICE OF INVESTOR EDUCATION AND ADVOCACY

regular statements. You should never feel uncomfortable about 

questioning any trading activity that you don’t understand. Remember—it’s your money. You also should keep all records of 

conversations that you have about any of your investments.

Question why you cannot retrieve your principal or 

cash out your profits. 

If your broker, financial adviser or other person with whom 

you have invested your money 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 regulator. 

WHERE TO CALL FOR HELP

SEC: (800) 732-0330

FINRA BrokerCheck: (800) 289-9999

State Regulators: (202) 737-0900
A GUIDE FOR SENIORS 5

HERE ARE SOME RED FLAGS 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 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 a fax, be certain to check 

out both the person and firm making the offer and the investment they are pushing.
6 OFFICE OF INVESTOR EDUCATION AND ADVOCACY

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. Oil and gas scams typically increase 

after highly publicized news item, like volatile gas prices, to 

lure potential investors and make their “opportunity” sound 

more legitimate.
A GUIDE FOR SENIORS 7

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. 
8 OFFICE OF INVESTOR EDUCATION AND ADVOCACY

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 clandestine overseas 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 on Wall Street, or in London, Geneva or other 

world financial centers. 

HIGH RETURN OR “RISK FREE” INVESTMENTS

Some unscrupulous investment advisers 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 
A GUIDE FOR SENIORS 9

risk profile of each investment recommendation and should 

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. 
10 OFFICE OF INVESTOR EDUCATION AND ADVOCACY

“Senior” Specialists and Advisors:

WHAT YOU SHOULD KNOW ABOUT 

PROFESSIONAL DESIGNATIONS

Some financial professionals use designations such as “senior 

specialist” or “retirement advisor” to imply that they are experts at helping seniors with financial issues. Many seniors, 

however, don’t understand the titles or the sets of initials 

that may follow the names of these financial professionals. 

The education, experience, and other requirements for receiving and maintaining a “senior” designation vary greatly. 

In some cases, a financial 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 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, www.finra.org/investor/resources/designations. 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 a financial professional. 
A GUIDE FOR SENIORS 11

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 a financial 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. 
12 OFFICE OF INVESTOR EDUCATION AND ADVOCACY

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:

Securities and Exchange Commission 

Office of Investor Education and Advocacy 

100 F Street, N.E. 

Washington, D.C. 20549-0213

Telephone: (202) 551-6551 or (800) 732-0330

Fax: (202) 772-9295

You also can send us an online complaint form at www.

sec.gov/complaint.shtml or email us at help@sec.gov.

ADDITIONAL SEC RESOURCES

In addition to the investor education material discussed 

elsewhere in this Guide, the SEC website includes databases that allow you to begin your investigations about 

potential investments.
A GUIDE FOR SENIORS 13

You can check our EDGAR database for filings filed by 

registered securities issuers and mutual fund companies, 

www.sec.gov/edgar/searchedgar/webusers.htm. Available 

filings include registration statements, proxy materials, and 

periodic reports. If a company is exempt from the SEC’s 

registration requirements, EDGAR often references the 

Form D (notice of exemption) provided by the issuer. You 

can obtain a Form D by calling (202) 551-8090.

Our online brochure Protect Your Money: Check Out 

Brokers and Investment Advisers, www.sec.gov/investor/

brokers.htm, links to the Investment Adviser Public Disclosure website (IAPD). This database includes the registration 

statements filed by investment advisers registered with the 

SEC and in certain states. 

If you have been a victim of a scam, you can check the litigation section of the SEC’s website, www.sec.gov/litigation.

shtml, for information about any SEC actions or any investors claims funds.

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 if the broker and the broker’s 
14 OFFICE OF INVESTOR EDUCATION AND ADVOCACY

firm are licensed to do business in your state. Your state regulator also can check the disciplinary history of a broker or 

brokerage firm. Similarly, your state regulators can tell you 

whether an investment adviser is registered with them.

You can find out who your state securities regulator is by 

visiting the website of the North American Securities Administrators Association, Inc. (NASAA) at www.nasaa.org or 

by calling (202) 737-0900. In addition, NASAA’s website 

includes investor information devoted to seniors. You also 

can call NASAA at (888) 846-2722 to obtain hard copies of 

their investor education materials.
A GUIDE FOR SENIORS 15

Financial Industry Regulatory Authority (FINRA)

FINRA, a self-regulatory organization, also regulates 

the brokerage industry. If you have a complaint against a 

FINRA member firm or one of its employees, you can file 

a complaint at:

FINRA Investor Complaint Center

1735 K Street NW

Washington, DC 20006

Fax: (866) 397-3290

You also can file an online complaint by going to www.

finra.org.

You can verify registration and disciplinary information 

about an individual broker or brokerage firm by using 

FINRA BrokerCheck, www.finrabrokercheck.org. You also 

can call them toll-free at (800) 289-9999.

FINRA’s website includes investor resources as well as an 

investors’ claims fund page.
16 OFFICE OF INVESTOR EDUCATION AND ADVOCACY

SEC Publications and 

Online Materials

PRINT PUBLICATIONS

You can obtain the following brochures by contacting the 

SEC’s Office of Investor Education and Advocacy at (800) 

732-0330 or help@sec.gov. 

• Ask Questions (also in Spanish)

• Bankruptcy: What Happens When Public Companies 

Go Bankrupt

• Certificates of Deposit: Tips for Investors

• Get the Facts on Saving and Investing (also in Spanish)

• Internet Fraud: How to Avoid Internet Investment Scams

• Invest Wisely: An Introduction to Mutual Funds

• Microcap Stock: A Guide for Investors

• Variable Annuities: What You Should Know 
A GUIDE FOR SENIORS 17

THE INTERNET

The SEC has a page on its website devoted specifically to 

senior citizens: www.sec.gov/investor/seniors.shtml. This 

page provides links to critical information on investments 

that are commonly marketed to seniors—including variable annuities, equity-indexed annuities, promissory notes, 

and certificates of deposit. It also warns against the dangers 

of listening to the sales pitches of cold-callers and alerts 

seniors to the very real threat of affinity fraud—scams that 

prey upon members of identifiable groups, such as religious 

or ethnic communities, professional groups, or the elderly. 

You can also find tips and specific financial education at 

www.investor.gov. 
18 OFFICE OF INVESTOR EDUCATION AND ADVOCACY

We also have a “Seniors Care Package”, a collection of our 

most popular brochures for seniors. Seniors can view the care 

package online on the SEC’s seniors web page, and they can 

order hard copies by clicking on a link that will send their 

request via email. Seniors also can send an email directly to 

help@sec.gov or call the Office of Investor Education and 

Advocacy at (800) 732-0330 to request the package. You can 

find the entire searchable list of publications on our website 

at www.sec.gov/investor/pubs.shtml. 

1-800-732-0330

www.investor.gov