REDUCING YOUR RISK OF INVESTMENT FRAUD You say your awareness of investment fraud has been heightened by recent news reports. But, have you thought about how to reduce your risk? CFA (Chartered Financial Analyst) Institute, the global association for investment professionals, offers investors these 10 tips*: 1. Become an informed investor. Understand clearly the investment strategy, financial products and the risk involved. Research, study and ask questions –arm yourself with knowledge to make smart choices. 2. Match investment strategy to reported performance. Find out if the investment firm is independently audited, who audits the company, and whether the purported figures comply with Global Investment Performance Standards. 3. Watch for e-mail solicitations and Internet fraud. If something sounds too good to be true, it probably is. Treat information from unknown sources on the Internet with great suspicion. 4. Be wary of “sure things,” quick returns, and special access. Beware of scammers who readily make promises they cannot substantiate 5. Understand what, if any, regulatory oversight exists. Know that more regulation typically means there will be less risk involved. 6. Assess the operational risk and infrastructure. Check out a firm’s physical infrastructure for trading and administration, along with its processes and controls. Is there a system of checks and balances in place to guard against fraud? 7. Ask about independent audits, who performs them and if you can see the company’s audited financial statements. The auditor should be independent, reputable and congruent with the size and scope of the investment operation. 8. Assess the personnel. Find out who makes investment decisions and who implements the investment strategy. They should be separate people with relevant experience, education and training. 9. Perform a background check through FINRA, the Financial Industry Regulator Authority in the United States, and/or CSA, the Canadian Securities Administrators, to check the backgrounds of securities firms and registered securities representatives. Make sure whomever you are working with is not under investigation, and be wary of anyone who tries to pressure you into an investment before you have time to check. 10. Limit your exposure. Diversification is one of the most fundamental and enduring investment principles. By limiting your exposure to five- to 10-percent of your assets, the principle of diversification can protect you if an investment turns out to be fraudulent.
Posted on: Thu, 26 Sep 2013 05:13:12 +0000
Trending Topics
Recently Viewed Topics
© 2015