Learn About Investment Red Flags

Help your clients, community, and investors identify the red flags that indicate a risky investment, scam, or fraud. 

RED FLAG: The promise of a “low risk” investment.

Anyone can promise low risk on an investment, but that doesn’t make it real. Markets can be volatile and investments are susceptible to their conditions. If someone is promising low to no risk on an investment, that’s a red flag.

RED FLAG: The promise of a “guaranteed return” on your investment.

Like a low to no risk promise, if an investment is described as having guaranteed returns, that is a red flag. Returns rely on market conditions, and no one can guarantee the high performance of any investment.

RED FLAG: You are not allowed to talk or share information about the investment

Legitimate financial programs, assets, or investments are generally registered or licensed with a state or federal regulator such as the DFPI or the Securities and Exchange Commission (SEC). That means they shouldn’t be secret since they are already known to regulators. You can also verify whether an investment broker or product is licensed by the DFPI by using our Financial Provider search.

RED FLAG: No contract or nothing is provided in writing

All terms and details of an investment should be provided in writing for you to keep for your own records. This helps an investor identify if the terms of their agreement have been changed without their knowledge. If you can’t get it in writing, it’s a red flag.

RED FLAG: Recruitment or fees are required

This is an immediate sign of a potential pyramid scheme. In this scheme, new investors must pay a fee and promise to recruit other investors to earn money or commissions. The cycle continues, but the only real people benefitting from the returns are those at the very top. 

RED FLAG: Crypto wallet or information is requested

Scammers are out there selling bogus crypto opportunities to interested investors. If a crypto salesperson requests access to a crypto wallet or other personal information, it’s likely a scam and should be seen as a red flag.

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