Cold calling is still a popular way for securities sellers to attract investors despite advances in communications technology and the implementation of the Do Not Call Registry. That’s why the Securities and Exchange Commission advises investors to be wary of over-the-phone investment scams. Signs that an investment opportunity may be fraudulent include high-pressure sales tactics, a pitch involving “breakthrough technologies,” refusals to send written information and calls from unauthorized or unsupervised salespersons. For more on this continue reading the following article from JDSupra.
While the National Do Not Call Registry has certainly reduced the number of sales calls investors receive, cold-calling is still a commonly used practice among securities firms. Therefore, it is important to know how to spot a potential investment scam.
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While legitimate callers ask questions to understand your financial situation and investment goals before recommending that you buy anything, cold-calling is also used by fraudsters who want to simply take your money.
As outlined by the Securities and Exchange Commission, investors should watch out for the following:
- High-pressure sales tactics. Aggressive cold callers speak from persuasive scripts that include retorts for your every objection. As long as you stay on the phone, they’ll keep trying to sell. And they won’t let you get a word in edgewise.
- Pitches that stress “once-in-a-lifetime” opportunities. Watch out for someone who tells you about a “once-in-a-lifetime” opportunity, especially when the caller bases the recommendation on “inside” or “confidential” information.
- Callers touting companies with “breakthrough technologies.” These technologies play off of legitimate technologies, but at the same time sound just a little too good to be true.
- Callers who refuse to send you written information about the investment. This is a form of manipulation designed to force a quick decision. You should be able to receive information about an investment and take as much time as you need to review it.
- Calls from unregistered and unsupervised salespersons. Cold-calling “brokers” and their bosses may not be properly registered to sell securities—and often operate in an environment completely devoid of required supervisory procedures. You can verify whether the caller is registered to sell securities by using FINRA BrokerCheck.
