Bernard Madoff

New Website to Help Stop Investment Scams

Bernard Madoff

A few weeks ago, I wrote about the continuing proliferation of Ponzi Schemes in the post-Madoff world. Today, I found a basis for hope upon reading this press release describing how the Better Business Bureau (BBB) and the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation have teamed up to produce a new Website to combat investment fraud, BBB Smart Investing. This elegantly designed Website is certain "to help investors make smarter investing decisions while avoiding fraud, risky investments and unlicensed brokers." Considering the many warnings we have issued regarding licensed brokers, it is difficult to fathom the damage that could be inflicted by unlicensed brokers.

Like the great researchers in the nascent field of Behavioral Finance, FINRA discovered that investors' Achilles heel is overconfidence. Their survey revealed that 92 percent felt "somewhat" or "very" confident about managing their finances, with almost 80 percent describing themselves as "somewhat" or "very" knowledgeable about investing. Unfortunately, only 44 percent demonstrated a modicum of basic financial literacy. This wide discrepancy between perception and reality readily explains the $1.5 billion in losses to investment scams documented in 2011.

If you are one of my regular readers, I truly do not worry about you falling victim to fraud except for identity theft, which can happen to anyone. Nevertheless, you may know someone who could be vulnerable, which is why I recommend ordering this free DVD, "Tricks of the Trade: Outsmarting Investment Fraud." If you have reason to believe that someone you know may have been the victim of a financial fraud or simply wrongful treatment such as churning (excessive buying and selling of securities in a customer's account chiefly to generate commissions that benefit the broker), this Webpage will tell you how to report it.