RICHMOND — Following the Federal Reserve’s recent announcement
that interest rates are expected to remain low until at least late 2014, the State
Corporation Commission (SCC) cautions Virginia investors to beware of extraordinarily
risky or outright fraudulent investments promising higher yields or returns.
Of particular concern are individuals who depend on fixed income investments, particularly
seniors, who may be tempted to abandon their slower growing but safe investments
for alternative investments without fully understanding the risks and terms.
All investments carry some risk. The level of risk usually is related to the return
that investors can expect to receive. Investments with higher yields or returns
generally carry a higher risk to investors. The lower the risk, the lower the yield
Ron Thomas, director of the SCC’s Division of Securities and Retail Franchising,
cautions Virginians to be wary of any investment or salesperson promising high yields
or returns with little or no risk. “When evaluating any investment, it pays to remember
that risk and reward go together,” he said.
Thomas noted that income-starved investors may be more easily lured into fraudulent
schemes that may be cloaked as private placement offerings, promissory notes, securitized
life settlement contracts, and investments in energy, precious metals, and distressed
He urges Virginians to make sure they fully understand an investment product and
determine that it meets their particular needs before handing over their hard-earned
money. He reminds investors to ask the following questions:
- Are claims made for the investment realistic? Use common sense and get a professional,
third-party opinion when presented with investment opportunities that seem to offer
unusually high returns in comparison to other investment options.
- Has the seller given you written information that fully explains the investment?
Request written information that fully explains the investment, such as a prospectus
or offering circular.
The documentation should contain enough clear and accurate information to allow
you or your investment adviser to evaluate and verify the particulars of the investment.
For more information, call the Securities Division in Richmond at (804) 371-9051
or toll-free (in Virginia) at 1-800-552-7945. You may also visit the division’s
website at www.scc.virginia.gov/srf or the North American Securities Administrators
Association’s website at www.nasaa.org.