State Names Top Five Investment Scams

This year’s top five investment scams highlight the importance of educating Ohio investors not only during April’s observance of National Financial Literacy Month, but year-round.  Con artists and scams are a major focus for the Ohio Department of Commerce Division of Securities in 2010, which launched the statewide “Con Artist” public awareness campaign in February.

“Con artists will lie, cheat and steal from anyone, especially those who trust them the most—their family, longtime friends and neighbors,” said Kimberly Zurz, Director of the Ohio Department of Commerce.  “Ohioans must be alert for signs of the five most common types of scams perpetrated by con artists before investing their hard-earned money.”

The “Con Artist” campaign features radio and television advertisements, billboards, newspaper and Internet advertisements, print materials, a hotline 1‑877-NVEST411 (1-877-683-7841) and website  The ads are running statewide through May and focus on how con artists find and befriend potential investors.  As soon as the con artist gains your trust at work, school, a house of worship, a charity group, in the neighborhood or at a “free lunch” seminar—he or she is “going to take you for everything you’ve got.”

“Con artists often promise high returns with little or no risk,” said Securities Commissioner Andrea Seidt.  “Investors need to be aware of the most common investment scams and, when considering an investment, take their time to research the opportunity and read the prospectus or offering circular in full before they invest.”

For the third consecutive year, Ponzi schemes lead the list of the Division’s Top Five Investment Scams. “While many investors recognize the Bernard Madoff scandal as a classic Ponzi scheme, there are smaller Ponzi schemes at work all the time,” Commissioner Seidt said.

The Division of Securities warns the public of the following investment scams:

1. Ponzi schemes.  A Ponzi scheme promises high returns to investors and uses money from new investors to pay earlier investors.  These schemes eventually collapse with the later investors losing their entire investment.   Many of these schemes include unregistered and even fictitious securities.

2. Investments involving real estate.  These schemes target investors with pitches that can include the buying, rehabbing, selling and leasing of real estate.  Investors should be particularly leery of these investments in the aftermath of the mortgage crisis and the high number of foreclosures.

3. Investment adviser fraud.  The term investment adviser describes a broad range of people who are in the business of giving advice about securities.  Many investors give their investment advisers discretionary authority over their investments.  This means that the investment adviser can manage the investor’s money without obtaining prior approval for changes.  Investment adviser fraud occurs when the advisers take advantage of the investor’s confidence in them and allows them to have too much control over their money.  The Division suggests maintaining control over your investments, and not granting discretionary authority over all of your funds.

4. Affinity fraud.  Affinity fraud occurs when an investment promoter takes advantage of people’s tendency to trust those who share similarities with them, such as attending the same place of worship, being a member of the same race or ethnic group, or sharing common friends or hobbies.  Investors should be especially wary of testimonials from family, friends and acquaintances who express enthusiasm for their investment’s success.

5. Exotic, non-traditional investments.   These securities do not include typical investment products such as a stock, bond or promissory note.  The promoters pitch unique or exotic ideas or promote products that require the expertise of someone knowledgeable about a particular commodity such as precious metals, foreign currency, art, fine wine or stamps.  Non-traditional investments should not typically be purchased by novice or non-sophisticated investors.

Before investing, Commissioner Seidt encourages investors to call the Division’s Investor Protection Hotline at 1‑877-NVEST411 (1-877-683-7841) to ask: 

• Is the brokerage firm and salesperson licensed to sell securities in Ohio?
• Have any enforcement actions been taken against them?
• Has the security been properly registered with the Division of Securities?

The Division of Securities offers investor education presentations, which can help Ohioans to identify and avoid investment fraud.  The presentations are tailored to the age and investing experience of the audience.  Last year, the Division’s staff made 47 presentations to more than 4,400 participants.   Organizations that want to schedule a Division speaker at senior centers, community organizations, service groups, schools or other locations should call the Investor Protection Hotline at 1‑877-NVEST411 (1-877-683-7841) or send an e-mail to

The Division also offers a variety of investor education publications, which can be obtained on its website at or by calling the hotline.

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