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    Fighting Fraud 101Smart Tips for Investors

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    Even if you have never been subjected

    to an investment fraudsters salespitch, you probably know someone

    who has. Following the legendary

    Willie Sutton principle, fraudsters tend

    to go where the money isand thatmeans targeting older Americans who

    are nearing or already in retirement.

    Fraudsters also have in their sights the

    millions of Baby Boomers who havebeen accumulating sizeable retirement

    nest eggs through company 401(k)

    plans and personal accounts.

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    The Face ofInvestment FraudRecent research has shattered the stereotype ofinvestment fraud victims as isolated, frail and

    gullible. Do you know anyone who meets thefollowing description?

    Self-reliant when it comes tomaking decisions

    Optimistic

    Above-average financial knowledge

    Above-average income

    College-educated

    Experienced a recent healthor financial setback

    Open to listening to new ideasor sales pitches

    If so, you know someone who fits the profile ofan investment fraudsters prime target.

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    The Psychologyof a ScamWeve all heard the timeless admonition, If itsounds too good to be true, it probably is

    great advice, but the trick is figuring out whengood becomes too good. Theres no brightline. Investment fraudsters make their living bymaking sure the deals they tout appear bothgood and true.

    Theyre masters of persuasion, tailoring their

    pitches to match the psychological profiles oftheir targets. They look for your Achilles heelby asking seemingly benign questionsabout

    your health, family, political views, hobbies orprior employers. Once they know which buttons

    to push, theyll bombard you with a flurry ofinfluence tactics, which can leave even thesavviest person in a haze.

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    The truth is, were all at risk. Anyone

    with any money is bound to hear from

    a fraudster at some point. But you canhelp protect your family and friends by

    recognizing how investment fraudsters

    operate and by reporting suspicious

    sales pitches and actual scams.

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    Commontacticsinclude:

    ThePhantomRichesTacticdangling theprospect of wealth, enticing you with something

    you want but cant have. These gas wellsare guaranteed to produce $6,800 month inincome.

    TheSourceCredibilityTactictryingto build credibility by claiming to be with areputable firm, or to have a special credentialor experience. Believe me, as a senior vice

    president of XYZ Firm, I would never sell aninvestment that doesnt produce.

    TheSocialConsensusTacticleadingyou to believe that other savvy investors havealready invested. This is how ___ got his start.

    I know its a lot of money, but Im inand so ismy mom and half of her churchand its worthevery dime.

    TheReciprocityTacticoffering to do asmall favor for you in return for a big favor.Ill give you a break on my commission if youbuy nowhalf off.

    TheScarcityTacticcreating a false senseof urgency by claiming limited supply. There are

    only two units left, so Id sign today if I were you.

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    Investment FraudProtect YourselfIf these tactics look familiar, its becauselegitimate marketers use them, too. But one keydifference is that real deals will still be theretomorrow. So always take the time to stop andthink before making a decision.

    Here are three key strategies youor anyoneyou know who fits the profile of a potential fraud

    targetcan use to help distinguish good offersfrom bad ones:

    End the conversationPractice saying No. Simply tell the person,

    I am sorry, I am not interested. Thank you.Or tell anyone who pressures you, I nevermake investing decisions without firstconsulting my ____. I will contact you ifI am still interested. Fill in the blank withwhomever you chooseyour spouse,child, investment professional, attorneyor accountant. Knowing your exit strategyin advance makes it easier to leave theconversation, even if the pressure starts rising.

    Turn the tables and ask questionsA legitimate investment professional mustbe properly licensed, and his or her firmmust be registered with the Financial IndustryRegulatory Authority (FINRA), the Securities

    and Exchange Commission (SEC) or a statesecurities regulatordepending on the typeof business the firm conducts.

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    In addition, with very few exceptions, companies

    must register their securities with the SEC beforethey can sell shares to the public. So, before yougive out information about yourself:

    Ask:

    Are you and your firm registeredwith FINRA? Are you registered with the SEC? Are you registered with a state securities

    regulator? Which one(s)?

    Is this investment registered with theSEC or my state securities regulator?

    Check:

    Verify the answers by checking the sellers

    background. Visit SaveAndInvest.org or call(888) 295-7422.

    Or use these other helpful resources for moreinformation about:

    Abrokerorfirm: FINRABrokerCheck www.finra.org/brokercheck

    (800) 289-9999

    Aninvestmentadviser:

    SECInvestmentAdviser PublicDisclosureDatabase www.adviserinfo.sec.gov

    Anyinvestmentseller: NorthAmericanSecurities

    AdministratorsAssociation www.nasaa.org

    Aninsuranceagent: StateInsuranceCommission

    National Association of

    Insurance Commissioners www.naic.org

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    Check:(continued)

    Check out the investment and confirm whatthe salesperson tells you using the SECs EDGARdatabase of company filings:

    Forinvestments:

    SECsEDGARDatabasewww.sec.gov/edgar.shtml

    Also, call your state securities regulator to findout what they know about the company.

    See the tear-off Resources panel for moreinformation.

    Talk to someone firstBe extremely skeptical if the person

    promoting the deal says, Dont tell anyoneelse about this special deal! A legitimateinvestment professional wont ask you tokeep secrets.

    Even if the seller and the investment are

    registered, its always a good idea to discussthese sorts of decisions with family or atrusted financial professional.

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    3

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    Take Your Name OffSolicitation ListsOne easy step you can take to reduce thenumber of sales pitches you receive is to take

    your name off of telemarketing and junk mail

    lists. Businesses that advertise or market theirproducts and services directly to consumerstypically purchase or compile their own lists ofpotential customers.

    The answer to how did they get my name?

    is fairly simple: local phone listings, public realestate records, tax assessments on personalproperty, donations to political or charitableorganizations, club rosters, alumni listingsand a host of other sources. Online advertisers

    use cookies, which are small data files thattrack information about you, such as your Webbrowsing patterns and items youve put intoonline shopping carts.

    Heres how to cut the clutter:

    TelemarketingCalls

    www.donotcall.gov

    or call toll-free (888) 382-1222

    DirectMailandEmailOffers

    www.dmachoice.org CreditCardOffers

    www.optoutprescreen.com

    or call toll-free (888) 567-8688

    OnlineCookieCollecting

    www.networkadvertising.org

    Most legitimate businessesincluding securitiesfirmswill honor your request. So, if you receivea solicitation after taking the steps above, you

    should be all the more skeptical of the offer.

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    Who We Are

    FINRA, the FinancialIndustryRegulatory

    Authority, is an independent regulatoryorganization empowered by the federalgovernment to ensure that Americas 90million investors are protected. The missionof the FINRAInvestorEducationFoundation

    is to provide underserved Americans withthe knowledge, skills and tools necessary forfinancial success throughout life. FINRA andthe FINRA Investor Education Foundation donot sell investment products, promote products

    or firms or offer specific investment advice.The FINRA Foundations Investor ProtectionCampaign, SaveAndInvest.org, is a targetedeffort to reduce the incidence of investmentfraud among investors by teaching the tactics

    most commonly used by fraudsters and thesimple steps every investor can take to reducetheir risk. Become a Fraud FightervisitSaveAndInvest.org.

    The U.S. Securities and Exchange Commissions Office

    of Investor Education and Advocacy has reviewed this

    publication. The SEC does not endorse any particular

    investment product, service, profession, professional or

    brokerage firm.

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    If a Problem OccursIf you believe you have been defrauded or treatedunfairlyor if you suspect that someone youknow has been taken in by a scambe sure tosend a written complaint to a securities regulator.

    Heres where you can turn for help:

    FINRAComplaintsandTips9509 Key West AvenueRockville, MD 20850

    Fax: (866) 397-3290www.finra.org/complaintwww.finra.org/fileatip

    SECOfficeofInvestorEducationandAdvocacy100 F Street, NE

    Washington, DC 20549-0213Phone: (800) SEC-0330Fax: (202) 772-9295www.sec.gov/complaint.shtml

    StateSecuritiesRegulator

    North American SecuritiesAdministrators AssociationPhone: (202) 737-0900www.nasaa.org

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    ResourcesBefore you invest, ask and check. Visit or call:SaveAndInvest.org

    (888) 295-7422

    Or use these other helpful resources for moreinformation about:

    ABrokerorFirm:FINRABrokerCheckwww.finra.org/brokercheck

    (800) 289-9999AnInvestmentAdviser:SECInvestmentAdviserPublic Disclosure Databasewww.adviserinfo.sec.gov

    ABroker-Dealer,InvestmentAdviserorInvestment:NorthAmericanSecuritiesAdministratorsAssociationwww.nasaa.org

    (202) 737-0900

    AnInsuranceAgent:NationalAssociationofInsuranceCommissionerswww.naic.orgPhone: (866) 470-6242

    AnInvestment:SECsEDGARDatabasewww.sec.gov/edgar.shtml

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    Keepth

    iscardsomewhereh

    andy!

    Protect Yourself fromInvestment FraudAlways take the time to stop and think beforemaking an investment decision. Here are three

    key strategies you can use to help distinguishgood investment offers from bad ones:

    Endtheconversation:Simply tell theperson, I am sorry, I am not interested.Or tell anyone who pressures you, I nevermake investment decisions without firstconsulting my ___. Fill in the blank withwhomever you choose. And dont worryabout missing outreal deals will still bethere tomorrow.

    Turnthetablesandaskquestions:Beforeyou give out information about yourself,or sign on the dotted line, ask, Are youa licensed broker? Is that investmentregistered? Then check out the sellerand the investment using the resourceson the back of this card.

    Talktosomeonefirst:Even if the sellerand the investment are registered, its

    always a good idea to discuss these sortsof decisions with family or a trustedfinancial professional.

    LearnmoreatSaveAndInvest.org:

    SaveAndInvest.org is a free service from the

    financial authorities at the FINRA Investor

    Education Foundationhelping protect you from

    investment fraud and providing information to

    help you confidently handle your finances.

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    2.

    3.

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    SaveAndInvest.org1735 K Street, NWWashington, DC 20006-1506www.SaveAndInvest.org(888) 295-7422 11 0011 711/11