February 1, 2012
HELENA, Mont. – Following the Federal Reserve's announcement that interest rates are expected to remain low until at least late 2014, Montana Commissioner of Securities & Insurance Monica J. Lindeen today cautioned investors to beware risky or outright fraudulent investments promising higher yield or returns.
"Investors running away from low yields on fixed investment products risk stumbling into the arms of scammers promising low risk and high returns," said Lindeen. "Don't chase the offer of high yield or returns into a dead-end investment."
Lindeen said she is concerned that individuals who depend on fixed income investments, particularly seniors, may be tempted to turn away from their slower growing but safe investments to alternative investments without understanding the risks and terms.
All investments carry a degree of risk. The level of risk usually is related to the return that investors can expect to receive. Investments with higher yields or returns carry a higher risk to investors; the lower the risk, the lower the yield or return.
"When evaluating any investment, it pays to remember that risk and reward go together," Lindeen said. "Anyone promising high yield or high returns with little or no risk should be approached with a high degree of skepticism."
Lindeen noted that yield-starved investors may be more easily enticed into fraudulent schemes that can be cloaked as private placement offerings, promissory notes, securitized life settlement contracts and investments in energy, precious metals and distressed real estate, all of which are contained in CSI's current list of Top Investor Traps.
Before purchasing any investment, Lindeen reminds investors to ask the following questions:
- Are claims made for the investment realistic? Use common sense and get a professional, third-party opinion when presented with investment opportunities that seem to offer unusually high returns in comparison to other investment options.
- Has the seller given you written information that fully explains the investment? Request written information that fully explains the investment, such as a prospectus or offering circular. The documentation should contain enough clear and accurate information to allow you or your investment adviser to evaluate and verify the particulars of the investment.
- Are the seller and investment licensed and registered in Montana? Call the Commissioner's office at 800-332-6148 to find out if they are properly registered. If they are not, they may be operating illegally.
For more information, visit the Commissioner's website at csi.mt.gov or call 800-332-6148.