Iowa Insurance Division Iowa State University Extension Investor Protection Trust


Preventing Investment Fraud

You may picture an investment fraud victim as someone who is lonely and unknowledgeable about investments. This is a common misconception, according to Pat Swanson, CFP® and families specialist with Iowa State University (ISU) Extension’s Invest Wisely Project ( “In reality the victim could be you, a family member, or your neighbor. According to the Financial Industry Regulatory Authority (FINRA), many investment fraud victims are self-reliant, optimistic, open to listening to new ideas, knowledgeable about financial issues, and are college educated.”

Craig Goettsch, director of investor education for the Iowa Insurance Division, says there are several practices to watch out for. ‘Free meal’ seminars are a common tactic to entice potential investors. “Although there are free seminars offered by legitimate organizations, your invitation may state this is an educational presentation where nothing is being sold and you may find out otherwise. Sometimes a book may be pushed, other times it may be a financial product that might not be suitable for you. The claims may be exaggerated or even misleading and the risks of the products may not be disclosed. You may be pressured to make a decision that day, or the presenter may follow up with a visit to your residence.”

Investment fraud and scams also can occur through telephone and e-mail solicitations. “Be careful of any such approaches,” Goettsch says. “The caller may have a name similar to a respected business. High-pressure sales tactics may be used as well as false promises. You may be asked to sign for a ‘free gift’ but in actuality you may be purchasing an investment product. Your credit card or checking account information may be requested to verify that you are eligible for the ‘free’ offer.”

‘IRA-approved’ investments are another tactic to mislead potential investors. Goettsch says the Internal Revenue Service does not approve or endorse investments for individual retirement accounts (IRAs) or advise individuals on how to invest their IRAs.
Skepticism is a good defense against being taken advantage of, both Swanson and Goettsch advise. “Never make a decision on the spot. Proceed slowly and cautiously before making any investment decision. Check with the Iowa Insurance Division with any questions about an investment product, and check out the broker or adviser by calling (877) 955-1212 or at,” Goettsch says. “Remember, if it sounds too good to be true, it probably is.”


The ISU Extension Invest Wisely Project provides a series of newspaper, radio, and web resources for investors.  It is funded by a grant from the Investor Protection Trust (IPT).  The IPT is a nonprofit organization devoted to investor education.  Since 1993 the IPT has worked with the States to provide the independent, objective investor education needed by all Americans to make informed investment decisions.




Updated March 24, 2008