The North American Securities Administrators Association (NASAA) released its most recent list of top financial products and practices that aim to exploit laws and take advantage of unsuspecting investors. The full list contains ten threats and was compiled by the securities regulators in NASAA’s Enforcement Section and it includes both new and long-standing threats. Below we highlight three of the newest threats from the list. For the full list, please visit the NASAA website.
Three New Threats
- Crowdfunding over the Internet– the 2012 Jobs act signed this year into law helps ease some of the burdens that small business face when raising capital. Croudfunding, made popular by non-profits during recent disaster relief efforts, is one of the most publicized new ways of raising funds even though provisions related to crowdfunding are not yet available and will not be until sometime in 2013. Investors should look at these new investment markets carefully before committing their funds.
- Using Self-Directed IRAs to Conceal Fraud – State securities regulators have investigated numerous cases where a self-directed IRA was used in an attempt to lend credibility to a bogus venture like a Ponzi scheme. Scam artists are using self-directed IRAs because of their implicit safety and tax-reducing characteristics. But beware, investments help in IRA’s have the same inherent risks as any other investment. Just because it is in an IRA doesn’t make it safe or real for that matter.
- The Immigrant Investor Program – this is a program linked to job-creation investments from foreign investors that is becoming quite popular because it can grant a U.S. visa to foreign nationals who invest a minimum of $500,000 into a new commercial enterprise. This program is particularly alluring because its connection to the federal government might make it appear safer and because domestic investors may be intrigued by the prospect of big funding from investors in China or other foreign countries with traditional or growing economic power.
photo credit: David Shankbone