How to Protect yourself from Financial Scammers

How to Protect yourself from Financial Scammers
By Laura Emerson (www.greatc.net)

Scam Signs: Run, Don't Walk

1. Fund raisers who evade questions about their licenses, registration, AND amount raised for recent clients in your industry.
   ----Legitimate broker-dealers comply with full disclosure requirements by the NASD in sales and contracts. Require evidence of registration.
   
   
2. Really wordy contracts filled with legalese that say, in essence, "we have no obligation to do anything we say," or no contract at all. ----Have a securities attorney write or review any contract involving investors or fund raisers. This is an area of legal specialization.
   
   
3. Contracts that are clear on fees and duration but vague on deliverables. -----It is your responsibility to define milestones and deliverables before you sign the contract.
   
   
4. Fund raisers who won't reveal the name of the investor/terms of investment as soon as they say they have some.
   
   
5. Offices with P.O. Box addresses only
   
   
6. "Investors" calling from "boiler room" type call centers.
   
   

How to Protect Yourself

1. Ask your banker, lawyer, and accountant to recommend broker-dealers. Their business with you is vulnerable if they steer you wrong.
   
   
2. "Smart money" is worth more than "dumb money." Hire people who specialize in (a) your industry, (b) investment in that industry, and (c) the funding range you seek.
   
   
3. On www.nasd.org, read all the requirements of NASD registered broker-dealers that protect clients. Look up the status of the broker-dealers you are considering.
   
   
4. Check websites for "tombstones" of funded deals and evidence of NASD licenses. If there are no tombstones, what services do they render? (business consulting, business plan writing?)
   
   
5. In interviews, ask for current registration with the NASD, the SEC, and in each of the states in which any private placement will be offered. If any answer is none, it is "buyer beware."
   
   
6. Complete background checks before you pay any money. Visit companies like www.ussearch.com to pay for background checks on individuals and companies. Visit www.nasaa.org and www.nasd.org for information (in English and Spanish) on broker-dealers, investment fraud alerts and other useful information.
   
   
7. Fees: Don't sign an open-ended retainer. Few entrepreneurs have deals strong enough to justify a commission-only fee. If your deal is not a slam dunk, negotiate a short term contract with monthly fees for pre-determined deliverables, like a deal critique and a pre-determined number of investment contacts. Require updates of all communications with investors.
   
   
8. Set written caps and an approval process for expenses.
   
   
9. Get everything in writing. Don't believe verbal promises that are not also stated on paper.