Investigate Before You Invest (Part 2)-Anton Legal Group


In my last blog, this Tampa lawyer started detailing the process of how to investigate an investment. Today, I’ll continue and conclude my insights on best investment practices that will help you avoid the need for securities mediation, securities arbitration, or civil litigation.

Step 3. Compare the risks with the potential rewards. With investments, there is no such thing as “the best of both worlds.” Every single investment involves some degree of risk of loss and, the higher the potential gains, the higher the risk of loss becomes. That’s it. The big secret to uncovering investment fraud. Most investment fraud is pitched as an investment with high returns and little to no risk. Take it from a Tampa lawyer with many years of experience in securities arbitration and securities litigation, this does not exist in the real world and should be your first clue that something is amiss with the investment. So what is an opportunity that is “too good to be true?” The SEC sites two recent examples, stating “In a recent enforcement action, the SEC alleged that an individual told investors that he would use a proven trading strategy to protect investors’ principal and generate guaranteed returns of as much as 21 percent per year.  In another case, the SEC alleged that three individuals and their companies conducted an investment scheme by selling unsecured notes and promising to double investors’ money every 90 days.” [1] If it sounds like you could get rich quick with little or no risk please, protect your fellow man and report the investment to the SEC immediately!

Step 4. If the risk is low, the returns should be low as well. If you are told an investment is little to no risk, you should compare the potential returns on that investment with the returns on a truly guaranteed investment such as a federally insured savings account. If the potential returns are significantly higher than the truly guaranteed returns, it very well may be fraudulent or have hidden risks you have not been presented with or considered.

Step 5. High yield means high risk. Since The Great Depression, the stock market has produced an average annual return of around 10%. That’s almost 90 years of consistent data. Any investment claiming to produce higher returns than that is highly risky.

Step 6. Promises of consistent double digit returns are consistently fraudulent. Investments that can sometimes produce double digit returns are very risky and highly volatile, producing enormous fluctuations in returns. If an investment claims to do this consistently, it is fraudulent, as this has never happened in the history of the stock market. The market fluctuates wildly, and only after the numbers are computed and averaged over time does it bring us to the 10% guideline. It has not ever consistently yielded a 10% return.

Please, if you are not getting anywhere with resolving securities issues on your own, call S. David Anton of Anton Legal Group!

S. David Anton, Esquire is a Certified Arbitrator for the Financial Industry Regulatory Authority (FINRA), formerly the NASD, which is the national organization responsible for overseeing the securities industry. He has served as a Judge/Panelist and rendered decisions in many securities arbitrations, giving him a unique perspective on his client’s cases.