RICHMOND — Investigate before you invest, even if you are dealing with someone you know. That’s the advice the State Corporation Commission’s (SCC) Division of Securities and Retail Franchising offers Virginia investors.
The SCC encourages Virginians to avoid becoming victims of affinity fraud by thoroughly researching any investment opportunity as well as the person offering it, no matter how well you know them or how trustworthy they seem.
Affinity fraud refers to investment scams that take advantage of a person’s membership or participation in an identifiable group, such as religious or ethnic groups, professional organizations, online forums or anywhere people gather around a shared belief, interest or goal. Affinity fraud can occur at places of worship, within immigrant or ethnic communities, at social clubs and elsewhere.
“Don’t let blind trust in someone leave you empty-handed when it comes to your investments,” said SCC Securities Division Director Ron Thomas. “Do your homework, even if an investment opportunity is offered by a long-time member or leader at your church, community group or social circle.”
People who promote affinity scams frequently are – or pretend to be – members of a particular group. They exploit the relationships and trust among group members, using it to convince members to invest in potentially fraudulent investment schemes or business projects for their personal benefit. In many cases, they enlist respected leaders from within the group to spread the word about an investment opportunity by convincing them that the investment is legitimate.
Thomas offers the following tips to help investors avoid affinity fraud and other investment schemes:
- Use caution when approached about an investment offered to you through your affiliation with a group or organization.
- Understand that almost all investments carry some degree of risk. Weigh risks versus rewards when considering an investment and don’t fall for promises of risk-free opportunities or guaranteed returns.
- Don’t feel pressured to act quickly. Beware of “can’t miss” or limited-time opportunities and make sure you understand where your money is going before you invest.
- Be aware that fraudsters are increasingly targeting groups through e-mail spams. Be wary of unsolicited e-mails from someone you don't know offering too-good-to-be-true investment opportunities.
- Rely on research rather than personal feelings. Trust but verify an investment opportunity by asking questions, getting information in writing and making sure the investment and the person offering it are properly registered. In Virginia, you can do this by contacting the SCC Division of Securities and Retail Franchising at 804-371-9051 or toll-free (in Virginia) at 1-800-552-7945 or visiting its website.
To learn more, contact the SCC Division of Securities and Retail Franchising or visit the North American Securities Administrators Association’s website.