Yield of Dreams

The Newest Threat to Investors? RIAs…

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We’ve written time and time again about investor traps—what are the latest murder holes, er, I mean, investment scams that clients should avoid. I just never thought investment advisors would be deemed one of them.

Today the North American Securities Administrators Association (NASAA) released its annual list of financial products and practices that threaten to trap unwary investors. One of the newest threats to investors? “Inappropriate advice or practices from investment advisors,” NASAA said.  

“The Bernie Madoff case opened a number of eyes and ears to the problems that could exist undetected in an investment advisory firm,” NASAA said.

But NASAA stressed that RIAs are under increased scrutiny from both state regulators and the SEC. For example, state actions against investment advisor firms doubled from 2010 to 2011.

Andrew Stoltmann, an attorney with The Stoltmann Law Offices in Chicago, said he has seen a surge of cases against RIAs recently. He believes the uptick is caused by many problematic brokers moving to the RIA channel.  

“Many stockbrokers have given up their Series 7 license and instead become fee-based investment advisors,” he said. “So guess what has happened?  We’ve seen many of the same abuses in the broker world transported to the previously ‘pure’ RIA world.”

Do you agree with him?

Other top threats to investors include:

  • Crowdfunding and Internet Offers
  • Scam Artists Using Self-Directed IRAs to Mask Fraud
  • EB-5 Investment-for-Visa Schemes
  • Gold and Precious Metals
  • Risky Oil and Gas Drilling Programs
  • Promissory Notes
  • Real Estate Investment Schemes
  • Reg D/Rule 506 Private Offerings
  • Unlicensed Salesmen Giving Liquidation Recommendations

Watch out for those murder holes…

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What's Yield of Dreams?

Casting a gimlet-eye on asset management issues.

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