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How To Avoid FraudYour net worth might make you a target for scams. Scam artists don't care how you have come across your money. They don't care whether you worked hard all your life to earn your money, or whether you hit the lottery the first time you played. It is your money they want. The only thing that may stand between a fraudster and your money is your preparedness when you are approached. What can I do to avoid being scammed?Ask questions and check out the answers. Fraudsters rely on the sad truth that many people simply don't bother to investigate before they invest. It's not enough to ask a promoter for more information or for references - fraudsters have no incentive to set you straight. Savvy investors take the time to do their own independent research. Research the company before you invest. You'll want to fully understand the company's business and its products or services before investing. Before buying any stock, check out the company's financial statements on the SEC's website, or contact your state securities regulator. All but the smallest public companies have to file financial statements with us. If the company doesn't file with us, you'll have to do a great deal of work on your own to make sure the company is legitimate and the investment appropriate for you. That's because the lack of reliable, readily available information about company finances can open the door to fraud. Remember that unsolicited emails, message board postings, and company news releases should never be used as the sole basis for your investment decisions. Know the salesperson. Spend some time checking out the person touting the investment before you invest - even if you already know the person socially. Always find out whether the securities salespeople who contact you are licensed to sell securities in your state and whether they or their firms have had run-ins with regulators or other investors. You can check out the disciplinary history of brokers and advisers quickly - and for free - using the SEC's and NASD's online databases. Your state securities regulator may have additional information. Be wary of unsolicited offers. Be especially careful if you receive an unsolicited fax or e-mail about a company -- or see it praised on an Internet bulletin board -- but can find no current financial information about the company from other independent sources. Many fraudsters use e-mail, faxes and Internet postings to tout thinly traded stocks, in the hopes of creating a buying frenzy that will push the share price up so that they can sell their shares. Once they dump their stock and quit promoting the company, the share price quickly falls. And be extra wary if someone you don't know and trust recommends foreign or "off-shore" investments. When you send your money abroad, and something goes wrong, it's more difficult to find out what happened and to locate your money. Here are some red flags warnings of fraud:
Con artists are experts at gaining your confidence. So be certain to treat all unsolicited investment opportunities with extreme caution. Whether you hear about the opportunity through an email, phone call, or a fax, be certain to check out both the person and firm making the offer and the investment they are pushing. Remember - an educated investor is our best defense against fraud! For more information on how to invest wisely and avoid fraud, please visit the Investor Information section of our website. http://www.sec.gov/investor/pubs/avoidfraud.htm
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