Fraudsters Posing as Brokers or Investment Advisers – Investor Alert
July 27, 2021
The FBI Criminal Investigative Division and the United States Securities and Exchange Commission’s Office of Investor Education and Advocacy (OIEA) warn of fraudsters swindling investors while pretending to be registered brokers or investment advisers.
Fraudsters may falsely claim to be registered with the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) or a state securities regulator in order to lure investors into scams, or even impersonate real investment professionals who actually are registered with these organizations. Fraudsters may misappropriate the name, address, registration number, logo, photo, or website likeness of a currently or previously registered firm or investment professional. They try to trick investors into believing that they are registered by using a number of tactics, including the following:
- “Spoofed Websites.” Fraudsters may set up websites using URL addresses or names similar to those of registered firms or investment professionals to trick investors into believing that the fraudsters are registered or that the fraudsters are affiliated with a registered firm or investment professional.
- Fake Profiles on Social Media. Fraudsters may set up profiles impersonating registered investment professionals on popular social media platforms and then message investors to solicit their money.
- Cold Calling. Fraudsters may set up boiler rooms with teams of people cold calling investors to solicit their money while claiming to be employees of registered firms. The fraudsters may use technology to make it appear they are calling from the firm’s location.
- Misrepresenting or Falsifying Documents. Fraudsters may recruit investors by misrepresenting that their firm was registered with the SEC, including pointing to the firm’s Form D filings to support the misrepresentation (to learn more, read this OIEA Investor Alert). Fraudsters may solicit investors by impersonating a registered investment professional and generating a fake version of a public report using the professional’s name and CRD number (to learn more, read this FINRA Investor Alert).
Registration of Investment Professionals. Many sellers of investment products or services are either brokers, investment advisers, or both. Most brokers must register with the SEC and join FINRA. Investment advisers that provide investment advice to retail investors generally must register with the SEC or the state securities regulator where they have their principal place of business.
To quickly and easily check if someone offering you an investment is currently licensed or registered, use the search tool on Investor.gov. Once you confirm that the seller is licensed or registered, make sure you are not dealing with an imposter. Contact the seller using contact information you verify independently – for example, by using a phone number or website listed in the firm’s Client Relationship Summary (Form CRS) – rather than relying on contact information the seller provides you. To ensure you are looking at a genuine copy of the firm’s Form CRS, follow these steps:
- In the “Check Out Your INVESTMENT PROFESSIONAL” search box on Investor.gov, select “Firm” from the drop down options and type in the name of the firm.
- In the search results, click on the relevant firm and then click on “Get Details.”
- Click on “Relationship Summary” or “Part 3 Relationship Summary.”
For additional information about Form CRS, visit investor.gov/CRS.
Watch Out for Red Flags
Regardless of whether someone claims to be registered with the SEC, beware if you spot these warning signs of an investment scam:
- Guaranteed High Investment Returns. Promises of high investment returns – often accompanied by a guarantee of little or no risk – is a classic sign of fraud. Every investment has risk, and the potential for high returns usually comes with high risk.
- Unsolicited Offers. Unsolicited offers (you didn’t ask for it and don’t know the sender) to earn investment returns that seem “too good to be true” may be part of a scam.
- Red flags in Payment Methods for Investments.
- Credit Cards. Most licensed and registered investment firms do not allow their customers to use credit cards to invest.
- Digital Asset Wallets and “Cryptocurrencies.” Licensed and registered financial firms typically do not require their customers to use digital asset wallets or digital assets, including so-called “cryptocurrencies,” to invest.
- Wire Transfers and Checks. If you pay for an investment by wire transfer or check, be suspicious if you’re being asked to send or to make the payment out to a person or to a different firm, the address is suspicious (for example, an online search for the address suggests it is not an office building where the firm operates), or you are told to note that the payment is for a purpose unrelated to the investment (for example, medical expenses or a loan to a family member). If you wire money outside of the United States for an investment that turns out to be a scam, you likely will never see your money again.
The SEC maintains a list of Impersonators of Genuine Firms. This list is not exhaustive – firms may be impersonated even if they are not on the list.
FINRA staff issued an article about imposter schemes.