“When evaluating any investment, it pays to remember that risk and reward go together. Anyone promising high yield or high returns with little or no risk should be approached with a high degree of skepticism,” Attorney General Jeffrey S. Chiesa said. “Our investigators in the Bureau of Securities will remain vigilant against investment fraud, but consumers need to perform their own due diligence when deciding how to invest their funds.”

“High interest rates or high rates of return should be viewed with caution, especially when the promised rates far exceed what other investments are offering,” said Thomas R. Calcagni, Director of the State Division of Consumer Affairs. “Con artists are using the lure of high rates to entice investors and defraud them of their hard-earned money.”

“Investors running away from low yields on fixed investment products risk stumbling into the arms of unscrupulous salespeople promising low risk and high returns,” said Bureau Chief Abbe R. Tiger. “Don’t chase the offer of high yield or returns into a dead-end investment.”

Chief Tiger said the Bureau of Securities 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.

Chief Tiger 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 the Bureau’s current list of Top Investor Traps.

Before purchasing any investment, the Bureau of Securities 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 New Jersey? The NJ Bureau of Securities can tell you if they are. If they are not, they may be operating illegally.

For more information, contact the Bureau of Securities at 973-504-3600 or via email at askBureauOfSecurities@dca.lps.state.nj.us.

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