NFA Investor Newsletter
|April 30, 2014
In this Issue:
|Who are scammers targeting? Look in the mirror.||Scammers holding your files for a king's ransom||Common investment traps to avoid||CFTC's whistleblower program ups the ante||Recent enforcement actions|
It's easy to think you could never be the victim of a fraud. After all, you are well-educated, optimistic and have a fair amount of financial knowledge. What you may not know, however, is that those very characteristics make you a prime target for investment fraud.
According to the Better Business Bureau, recent research has shattered the stereotype of investment fraud victims as isolated, frail and gullible. Ask yourself if the following description sounds familiar:
These are the characteristics of today's fraud victim. Today's fraudsters are masters of persuasion who tailor their pitches to match the psychological profiles of their targets.
The truth is anyone with money is at risk. The key is to recognize when an investment is "too good to be true," and unfortunately, there's no flashing sign to warn you when you're being scammed. Fraudsters make their living making their "deals" appear both good and true.
Some of the common tactics include:
With coercive tactics such as these, it's important for investors to distinguish good offers from bad ones. Here are three things you can do to help weed out the fraudulent investment opportunities:
If there's one thing you can count on these days, it's that cyber criminals are constantly devising new ways to steal people's personal information. One of the latest cyber scams involves a piece of malware — a malicious type of software — called CryptoLocker.
Typically spread via email, once CryptoLocker is installed on a computer, it locks people out of their files so that they can't access them without release from the cyber scammer.
According to the Federal Trade Commission, after the malware is unsuspectingly installed on a computer, the CryptoLocker crooks send a ransom note demanding payment for the release of the files, usually via Bitcoin or another anonymous payment method. Of course, once the victim pays the ransom, there's no guarantee that the fraudster will honor their promise to unlock the files. According to a study by the University of Kent, as much as 40 percent of CryptoLocker victims pay the ransom.
Usually, malware is inadvertently installed after disguising itself as fairly innocuous looking files, such as JPEG images, PDF files, Microsoft Office files or other familiar formats. There are even reports that Facebook could be one of the likeliest places to get a CryptoLocker malware.
Additionally, businesses potentially are even more vulnerable to this type of attack, because it can affect entire computer networks. At least one local television station has been targeted, and said the virus could have affected 10 years' worth of work by several departments.
So, how can you protect yourself from CryptoLocker and other malware scams? Here are three steps you can take to make yourself a more difficult target:
Despite a world filled with competent investment professionals and abundant resources for investors to make smart investment decisions, there always will be plenty of opportunities for people to make mistakes.
Investment executive turned author A. Michael Lipper recently reflected on this fact and concluded that one of the most common reasons people make mistakes is that they fall victim to investment traps. Many times, he says, these traps are the very shortcuts on which we rely when making decisions. An example of this is relying on labels to quickly narrow our investment focus. Lipper says that people believe they can predict the relative outcome of an investment simply because it is labeled "growth" or "value." The comfort afforded by these terms and other navigational tools can lull people into a false sense of confidence.
Although these sort of heuristic devices are essential for navigating the ocean of investment options, recognizing the potential traps they present can ensure you don't fall into them. Here are five investment traps to avoid:
As the Commodity Futures Trading Commission's (CFTC) jurisdiction expands to include the $400 trillion over-the-counter derivatives market, its budget increased only slightly this year. Nonetheless, this year could be a big one for CFTC enforcement actions for one reason: whistleblowers.
The CFTC was authorized to create a whistleblower program as part of the 2010 Dodd-Frank Wall Street Reform Act to reward individuals for coming forward with information that could lead to enforcement actions. The program allows for payments of monetary rewards and provides anti-retaliation protections for whistleblowers who share information with the CFTC. However, providing information does not grant the whistleblower immunity from prosecution.
Individuals who share information about Commodity Exchange Act violations that lead to an enforcement action and result in a monetary sanction of more than $1 million may be eligible for a monetary reward between 10 and 30 percent of the sanction collected, including amounts recovered in related actions by other agencies.
The CFTC received 58 whistleblower claims filed in fiscal year 2012, 138 in fiscal year 2013, and the Agency expects that number to grow in 2014.
To learn more about the detailed procedures and requirements for obtaining a whistleblower award, visit the CFTC's website.
In the first quarter of 2014, NFA issued Decisions, Final Orders in registration cases and Complaints against the following NFA Member firms and individuals. Click on the name for more detailed information.
Decisions in Disciplinary Cases
Let us know what you think about this newsletter
You can check the registration status and disciplinary history of any futures firm or individual.
You can file a complaint online. Be sure to include as much information as you can.
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