Your state government plays a critical role when it comes to the regulation of businesses involved in financial planning and investing.
We have gathered together links to important resources to help you investigate before investing your hard-earned money.
It’s important to note that the Department cannot answer specific investment questions like how you should invest your money. There are also limitations as to what the Department can do if you’ve lost money in an investment. But, we are here to help you make informed decisions.
The Department of Financial Protection and Innovation and the Department of Consumer Affairs have also joined forces to expand the information they provide to consumers.
You can also call the Department of Financial Protection and Innovation’s toll-free number at 1-866-275-2677.
Content list on this page
- Investigate Before You Invest
- Top-Ten Tips for Online Investors
- State of California Agencies – Useful Resources
- Other Helpful Consumer Resource Agencies
- Education & Outreach Consumer Resource Guide (PDF)
Find phone numbers, web site links, and other information for Federal, State, County, and private consumer groups and agencies.
- Investor Education
- Finance & Lending Education
The Seniors Against Investment Fraud (SAIF) Program is a statewide outreach campaign under the California Department of Financial Protection and Innovation. The primary purpose of SAIF is to alert and educate Californians over the age of 50 about investment and telemarketing fraud crimes and how to avoid being victimized by scam artists.
Troops Against Predatory Scams (TAPS) educates California’s military troops on how to avoid becoming a victim of financial and investment fraud. TAPS also serves as the enforcement arm against financial fraud crimes by taking action against the predators targeting our troops.
Investigage Before You Invest
Check Before You Invest
- Check Before You Invest Form (PDF) Contains helpful questions to consider when working with a financial services professional.
- Check Out Your Broker!
- Check Out Your Financial Services Professional
Investigate Before You Invest - Ten Do's and Don'ts For Investors
These links provide useful tips regarding certain financial and investment products and how to avoid situations of fraud.
Investigate Before You Invest Ten Do’s and Don’ts For Investors
The following tips are offered by the Department of Corporations as “guidelines” for prospective investors. The bottom line with any investment is research, research, research!!! You can never have too much information.
- Be cautious when strangers make contacts by “cold” phone calls, unannounced visits to your home or contacts from mailing lists. Phone calls from strangers offering get-rich-quick schemes can be a sign that a “boiler room” scam is on the line. Operators rent offices with impressive addresses and hire unlicensed salespeople to work banks of phones calling individuals from lists they buy. They promise fast profits and usually do not deliver.
- Question outrageously fantastic promises of extraordinary returns of 25%, 50% or even 100% on your money in short time periods. Too-good-to-be-true offers usually are just that.
- Shy away from high pressure sales techniques requiring hurried money commitments because ” will be too late.” Some fraudulent schemes have used messengers to pick up investors’ checks almost as soon as they were off the phone — this is usually the last contact the victims had with the companies.
- Avoid investments where the seller has little or no written information about the company or written information about past performance. But remember, even printed materials, no matter how slickly presented, can be bogus — read all materials carefully, ask questions and check with experts.
- Be wary of investments sold on the basis of rumors, tips or supposedly “inside information.”
- Ask the seller to give you written information about the investment, including the prospectus or offering circular and financial statement. Read them or get help reading them before you sign a purchase order to pay for investment. Such information is required for many types of investments, including stock offerings, limited partnerships, franchise offerings and mutual funds.
- Get competent help. Consult with your registered stock broker, banker, lawyer, accountant or real estate agent. Check out the company with your Better Business Bureau, securities administrator or a knowledgeable friend or family member.
- Contact government agencies to find out if a company or individual is properly licensed to do business or has any history of violating the law. Failure to properly register or a history of trouble with authorities should be a red flag to any prospective investor.
- Deal with established businesses whose reputations are known in the community.
- When in doubt, wait. If something seems fishy, if your questions are not satisfactorily answered, don’t commit your money. Remember, even with legitimate investments there is always the risk of losing money; there is no point in stacking the odds against you by putting your hard-earned savings in an investment that may not be on the up and up.
Predatory Lending Fact Sheet
The State of California is working hard to protect borrowers from illegal and improper lending practices while still making sure that people get the credit they need to live the American Dream. Prospective homebuyers and other borrowers need to do their part by being careful about the lenders they select. Educating yourself about the techniques that dishonest lenders use will help you avoid becoming a victim of predatory lending.
The term “predatory lending” is used to describe a variety of deceitful, fraudulent or unfair credit practices, including:
- Steering borrowers towards interest rates that far exceed the lender’s risks.
- Charging excessively high fees and commissions.
- Persuading a borrower to repeatedly reFinance a loan in order to charge high points and fees each time the loan is reFinanced (“loan flipping”).
- Misrepresenting the loan’s terms and conditions.
- Requiring high-cost credit insurance (“packing”).
Unscrupulous lenders who use these tactics often target vulnerable populations such as low-income borrowers and seniors.
PROTECT YOURSELF FROM PREDATORY LENDING PRACTICES
- Compare the interest rates and the total costs of loans offered by several banks and credit unions in your area.
- Ask lenders for names of other customers you can contact to see if they are satisfied with their experience.
- Check for consumer complaints against lenders you are considering by visiting our Web site at www.dfpi.ca.gov or by contacting your local Better Business Bureau.
- Don’t take the first loan you are offered.
- Be wary of lenders who contact you first, through mail, e-mail, door-to-door sales or telemarketing solicitations.
- Be suspicious of lenders or brokers who guarantee loan approval regardless of your credit history.
- Beware of offers that are “only good for a short time.”
- Steer clear of lenders who resort to high-pressure sales tactics.
- Be wary of promises to reFinance the loan to a better rate in the future.
- Watch out for “hidden” terms, such as penalties for early pay-off of the loan.
- Avoid “balloon” payments—some loans keep monthly payments down by requiring a big payment at the end of the loan term.
- Make sure the monthly payments are well within your monthly budget.
- Ask your lender exactly what is being offered—you have a legal right to know the total cost of the loan, the annual percentage rate, the monthly payments and how long you have to pay back the loan.
- Have all fees and points explained to you before applying for a loan.
- Always ask questions until you understand everything.
Before You Sign on the Dotted Line
- Make sure that you have received, read and understand all required disclosure documents.
- Check to see if the loan terms quoted to you match your loan documents.
- Before you sign the loan papers, have a lawyer, family member or friend go over them with you.
- Never sign a document with blank spaces; all spaces should be filled in before you sign.
- The bottom line: If you have any doubts, don’t sign!
Questions to Ask and Answer Before Investing in a Viatical Settlement Investment
- What is a viatical settlement investment?Patients who are terminally ill sell the death benefits in their life insurance policies at a discount so they can get cash to use during the remainder of their lives. The viatical settlement investor receives a portion of the death benefits when the insured dies. While there are sound, reputable companies that offer viatical settlement investments, these are highly risky investments; there is also a great risk of fraud.
- What kinds of problems can occur with viatical settlement investments?
- The insured lives longer than estimated, reducing the investor’s rate of return and tying up the investor’s money longer too.
- If the policy is a term life policy, and the insured outlives the term, the investor will get nothing.
- The policy is still “contestable” (usually a two-year period), meaning the insurance company can refuse to pay the death benefits for a variety of reasons unknown to the investor.
- The investor may be required to pay the premiums on the policy to keep it in force, or the policy actually lapses before the insured dies, and the investor gets nothing.
- The insurance company becomes insolvent and is not able to pay the death benefits.
- The viatical settlement company goes bankrupt and the investor’s money is lost or tied up indefinitely.
- What are the possible risks of fraud in viatical settlement investments?
- The policy is fraudulently obtained by the insured (for example, by concealing or misrepresenting his or her health condition) so the insurance company refuses to pay the death benefits.
- The viatical settlement company misappropriates the investor’s money and never purchases the insurance policies.
- The investor is not the named beneficiary on the policy, and the viatical settlement company never pays the investor the proceeds.
- What about the guaranteed return on my investment?With advancing medical developments, predictions about life expectancy are nothing more than guesses. And, since the return on an investor’s investment depends on how long the insured lives, an annual rate of return cannot be guaranteed. Finally, the “guarantee” assumes that nothing goes wrong with the investment.
- Do you know all the facts?
- Who pays the premiums on the insured’s policy?
- Who monitors the insured’s whereabouts and health?
- Did the doctor who estimated the insured’s life expectancy actually examine the insured?
- Who is responsible for obtaining the insured’s death certificate?
- Who is responsible for making a death benefit claim?
- What percentage of the investor’s “humanitarian” investment does the insured get?
- Does your sales agent receive a commission on the investment – how much?
- Are there any fees or costs the investor may have to pay – what are they and how much?
- Isn’t a viatical settlement contract simply another form of insurance investment?No, because viatical settlement investments are securities under the California securities law. Although a federal circuit court in one case called Life Partnersfound that a particular viatical investment offered was not a security, that case is not binding in California state courts. SB 1837 specifically defined “viatical settlement contract or a fractionalized or pooled interest therein” as a security under California law.
- Is a viatical investment an appropriate investment for you?Viatical settlement contracts may not be a suitable investment for you. Suitability is determined by considering various factors, including your age, your financial situation, your risk tolerance, other personal circumstances and your investment objectives. This is one more reason why viatical investments should only be sold through Licensed securities broker-dealers and should be qualified as investments by the state.
- If you have more questions, whom can you call?The California Department of Corporations regulates firms and individuals in the securities and investment industries, including stockbrokers, investment advisers, and financial planners. The Department also regulates investment products. The Department can provide you with information about Licensed firms and their agents and representatives, and about investment products. So, before you invest your money, take the time to check the backgrounds of your broker-dealers or investment advisers and make sure you understand all the risks associated with your investment, and that the investment has been properly qualified. The Department’s Consumer Services Representative can be reached at (213) 576-7643.
Top-Ten Tips for Online Investors
When You Invest Online, Be Sure To:
- Receive full disclosure, prior to opening your account, about the alternatives for buying and selling securities and how to obtain account information if you cannot access the firm’s Website.
- Understand that most likely you are not linked directly to the market, and that the click of your computer mouse does not instantly execute the trade.
- Receive information from the firm to substantiate any advertised claims concerning the ease and speed of online trading.
- Receive information from the firm about significant Website outages, delays and other interruptions to securities trading and account access.
- Obtain information before trading about entering and canceling orders (market, limit and stop loss), and the details and risks of margin accounts (borrowing to buy stocks).
- Determine whether you are receiving delayed or real-time stock quotes and when your account information was last updated.
- Review the firm’s privacy and Website security policies and whether your name may be used for mailing lists or other promotional activities by the firm or any other party
- Receive clear information about sales commissions and fees and conditions that apply to any advertised discount on commissions.
- Know how to, and if necessary, contact a customer service representative with your concerns and request prompt attention and fair consideration.
- Contact the Department of Financial Protection and Innovation to (1) verify the registration/licensing status and disciplinary history of the online brokerage firm, or (2) file a complaint, if appropriate.
Additional information can be obtained from the Department of Financial Protection and Innovation’s Website at www.dfpi.ca.gov and North American Securities Administrators Association’s Website at www.nasaa.org, or by calling the Department’s Consumer Services Office at (866) 275-2677 or outside the U.S. (916) 327-7585.
State of California Agency Resources
Department of Consumer Affairs
The Department of Consumer Affairs (DCA) Licenses and regulates 2.3 million professionals in more than 230 different professions, including accountants, doctors, dentists, contractors, cosmetologists and auto-repair technicians. The Department also helps consumers learn how to protect themselves from unscrupulous and unqualified individuals and protects professionals from unfair competition by unlicensed practitioners. Reach DCA at 1-800-952-5210.
- What Smart Shoppers Know About Telemarketing
- Filing a Complaint Against a Professional or Business with DCA
- Public Comments, Complaints & Suggestions for DCA
California Board of Accountancy
The California Board of Accountancy (CBA), which is part of the Department of Consumer Affairs, regulates the accounting profession licensing Certified Public Accountants (CPA) and the Public Accountants (PA). Contact CBA AT (916) 263-3680.
- Selecting a Certified Public Accountant or Public Accountant
- Filing a Comment or Complaint with CBA
Department of Insurance
The California Department of Insurance (DOI) regulates, investigates and audits insurance business to ensure that companies remain solvent and meet their obligations to insurance policyholders. The Commissioner issues certificates of authority to insurance and title companies seeking admittance into the California market; and Licenses agents, brokers, solicitors and bail bonds agents. Reach DOI at 1-800-927-HELP (4357).
California Department of Real Estate
The California Department of Real Estate (DRE) Licenses and regulates those who sell real estate. The Department also monitors certain activities of real estate Licensees doing business as mortgage brokers to ensure they comply with the real estate law. Visit Contact DRE page for more detailed information.
Other Useful State of California Sites
Other Helpful Consumer Resource Agencies
There are other state, local, and federal agencies as well as non-profit organizations that offer an array of consumer services. For further information or assistance call the Department of Financial Protection and Innovation toll-free at (1-866-275-2677).
- California Area Agencies on Aging provides information about senior programs and services along with details about rebates for energy costs, home maintenance, health costs, and taxes.
- California Commission on Aging serves as the principal advocate in the state on behalf of older individuals, advising the Governor, Legislature and Executive branch departments on senior issues.
- California Department of Insurance ensures that consumers are protected; that the insurance marketplace is fostered to be vibrant and stable; that the regulatory process is maintained as open and equitable; and that the law is enforced fairly and impartially.
- California Department of Real Estate licenses & regulates real estate brokers and salespeople along with mortgage lender and mortgage broker activities.
- Commodity Future Trading Commission – Consumer Alerts mission is to protect market users and the public from fraud, manipulation, abusive practices and systemic risk related to derivatives that are subject to the Commodity Exchange Act.
- California Board of Accountancy licenses & regulates certified public accountants and public accountants as well as accounting firms.
- Department of Consumer Affairs (DCA) licenses and regulates various professions including doctors, dentists, contractors, funeral and cemetery providers, auto repair technicians and repair shops, and cosmetologists. DCA also maintains a large library of consumer protection publications and materials on its website that is an excellent resource for consumers.
- Consumer Financial Protection Bureau mission is to make markets for consumer financial products and services work for Americans—whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products.
- Contractors State License Board protects consumers by licensing and regulating California’s construction industry.
- Federal Bureau of Investigation: Fraud Target Senior Citizens aims to defend and uphold our nation’s economy, physical and electronic infrastructure, and democracy. Because seniors are targets for financial fraud and scams, the FBI offers fraud prevention information specifically for seniors.
- Federal Trade Commission (FTC) deals with issues that touch the economic life of every American. It is the only federal agency with both consumer protection and competition jurisdiction in broad sectors of the economy. The FTC provides consumer protection for loans, credit cards, identity theft, telemarketing, funerals, and cemeteries.
- Financial Industry Regulatory Authority – Regulation (FINRA) is the largest independent regulator for all securities firms doing business in the United States. FINRA licenses & regulates individuals and companies conducting various securities activities, establishes rules, and conducts audits. Its chief role is to protect investors by maintaining the fairness of the U.S. capital markets.
- Division Of Corporations (DOC) licenses and regulates a variety of businesses that affect the everyday financial lives of Californians and represents a significant part of the State’s economy, including securities brokers and dealers, investment advisers and financial planners, and certain fiduciaries and lenders. The DOC also regulates the offer and sales of securities, franchises and off-exchange commodities.
- Los Angeles Public Library Provides abundance of information and services. They offer financial literacy information on their website entitled The Language of Money.
- NMLS Consumer Access is a fully searchable website that allows the public to view information concerning state-licensed mortgage companies, branches and individuals currently Licensed through NMLS.