Scammers lay psychological traps that build your trust, lower your skepticism and increase the likelihood that you will give them money.

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Day in and day out, investment con artists work to convince you to give them your hard-earned money — and they seem to work overtime during the holiday season. These are people who almost always lack a license to sell investments but act as if they do.

Older individuals and retirees are a preferred target because they have spent a lifetime accumulating assets. With so much money at stake, today’s investment fraud pitches are polished and sound plausible, and are often combined with slick websites and official-looking paperwork.

Then there’s the personal touch. Investment con artists like to get to know you. For them, this is not time wasted in idle conversation. It’s the opportunity to lay psychological traps that build your trust, lower your skepticism and increase the likelihood that you will give them money.

Elaborate as some of these schemes can be, it’s relatively easy to expose them for the time-worn cons they are, and turn the tables on the con artists.

Investment scams going strong in 2017

Two investment scams going strong in 2017 are boiler room pump-and-dump schemes and binary options frauds.

During the boiler room “pump and dump,” a high-pressure caller promises to let you in on a “can’t-miss” investment opportunity involving a low-priced penny or microcap stock. The more people who buy shares, the higher the share price rises — until the fraudsters dump their own shares, leaving the rest virtually worthless.

Pitches tend to play off recent trends and events. Today’s promotion might aggressively market a company involved in wildfire prevention, hurricane clean-up or clean water treatments. Next week, it’s a company with a new product promising to take an emerging market by storm, such as the e-cigarette or legalized marijuana industries.

Binary options scams start by showing you how easy it is to make money trading binary options. A binary option is a type of options contract in which the payout depends entirely on the outcome of a yes-or-no proposition, such as whether the price of a particular asset will rise above or fall below a specified amount. When the option expires, it makes either a pre-specified amount of money or nothing at all, in which case the investor loses the entire investment.

That’s risky enough. But victims of this fraud aren’t actually trading real options at all. Unregistered firms claiming to trade binary options set up bogus trading platforms (that look very real) which make it seem as though a trader is making real trades, and real money. Customers who ask for their money back often find their requests denied or are met with excuses, such as fictitious regulations that require an investor to send more money.

If you have opened a binary options trading account, be alert for signs of fraud, including pressure to send additional money and excuses for why the firm cannot credit purported gains to your account or return your funds. Be especially wary of any firm with trading platforms or banking services outside the United States. It’s safe to assume they are frauds.

In both of these scams, investors purportedly have ready access to “account executives,” “research analysts,” “professional traders” and even “regulatory authorities.”  Until they disappear, the scam artists are always willing to talk, and seem to have an answer for everything.

Tips to outwit the con artists

  • Don’t talk to cold callers. Let messages ring to voicemail — and if you don’t know the person, don’t call back. If you do pick up, and it’s someone you don’t know, simply hang up (any pangs of guilt will quickly pass).
  • Use FINRA BrokerCheck to verify the registration and background of any firm or financial professional. (FINRA is the Financial Industry Regulatory Authority.)
  • Don’t do business with unregistered individuals or firms. Don’t fall for the ploy that the firm or individual “doesn’t need to be registered,” or is registered in another country.
  • For stock pitches, do your own research. Start by checking the Securities and Exchange Commission (SEC) EDGAR database (at sec.gov) to see if the company that is being pitched files financial information with the SEC.
  • Use caution when visiting unfamiliar financial websites. They can be “bait” to lure you into the crosshairs of a scam.
  • Do an internet search for alerts or warnings when assessing an investment pitch or a company to invest in. See if any of the scenarios mentioned in the warnings sound like your situation.
  • Not sure if an investment pitch is real or a scam? Call FINRA’s Securities Helpline for Seniors at 844-57-HELPS (844-574-3577) for help with these and other investment-related questions.

FINRA is dedicated to investor protection and market integrity through the regulation of broker-dealers. Supervised by the SEC, FINRA is a not-for-profit organization congressionally authorized to protect America’s investors by making sure the broker-dealer industry operates fairly and honestly.