What is an Investment Scam?

Practices can include untrue or misleading information or fictitious opportunities.


Types of scams


  • Pyramid Schemes: A pyramid scheme is when fraudsters claim that they can turn a small investment into large profits within a short period. But in reality, participants make money by getting new participants into the program. 

  • Ponzi Schemes: This is when a fraudster or "hub" collects money from new investors and uses it to pay purported returns to earlier-stage investors, rather than investing or managing the money as promised.

  • Boiler room scam: refers to an outbound call center selling questionable investments by telephone. It usually refers to a room where salespeople work using unfair, dishonest sales tactics, sometimes selling penny stocks, private placements, or committing outright stock fraud.


The list can go on and on because there are infinite variation.

Red flags for fraud and common persuasion tactics


  • If it sounds too good to be true, it is. Watch for “phantom riches.” Be careful of claims that an investment will make “incredible gains,” is a “breakout stock pick” or has “huge upside and almost no risk!” Claims like these are hallmarks of extreme risk or outright fraud.

  • “Guaranteed returns” aren’t.  Most fraudsters spend a lot of time trying to convince investors that extremely high returns are “guaranteed” or “can’t miss.” They try to plant an image in your head of what your life will be like when you are rich. Don’t believe it.

  • High returns with little or no risk. investments yielding higher returns typically involve more risk.


We are an investment educational website so we will discuss what is investment scams and how you can avoid these kinds of Scams. 



In a world of constantly evolving regulations, licensing and compliance are of paramount importance. It is compulsory for companies whether a business, asset manager, broker, or financial investment firm the activity to be registered and regulated by the  FSA, FCA, MFSA, ASIC...ect.


These regulatory boards set a range of registration requirements before a broker is allowed to operate in the market. Also, these regulatory boards can ban financial product, firm, or the particular asset manager, as well as have the power to instruct firms to immediate action, modification, or revoke if necessary. 

Guide to Making Sure Your Broker Is Legitimate


  • Do Some Research- Financial firms are legally required to be registered with federal and state securities regulators. 

  • Transactions- Should be Bank to Bank transaction not Cash on hand 

  • Have a Conversation- Ask questions about what the company offers and its experience with clients who have similar needs to your own.

  • Test the broker- you can test the platform with a small trade with low lot sizes and then request a withdrawal. There is no real reason why a broker should hold onto your funds.


Keep in mind that there are always customers who are going to express negative opinions. Don’t get discouraged after reading one bad review. Use all the information available on the broker’s website, social media, forums, regulated bodies, etc. to make a meaningful conclusion. The research process will take some time. However, if you are serious about becoming a trader, you should be ready to invest the time and effort to pick the right broker and secure your hard-earned money.


Schedule a personal or phone consultation with one of our professionals so we can help you to find the right answers to your questions.

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Risk Warning:
Past performance of an investment is no guide to its performance in the future. Investments, or income from them, can go down as well as up. You may not necessarily get back the amount you invested. All opinions, news, analysis, prices or other information contained in our communication and on our website, are provided as general market commentary and do not constitute investment advice, nor a solicitation or recommendation to buy or sell any financial instruments or other financial products or services.

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