Investor Alert: Investment Adviser Impersonations on the Rise

Instances of fraudsters disguising themselves as investment advisers and brokers are on the rise, prompting the U.S. Securities and Exchange Commission’s Office of Investor Education and Advocacy (OIEA), the FBI Criminal Investigative Division, and FINRA, each to release investor alerts and warnings.

While these regulatory agencies have identified multiple concerning fraudulent schemes, each type is centered around impersonation of investment advisers – a particularly worrisome and dangerous trend. A recent example was reported by the Texas State Securities Board, which announced that a Texas fraudster created a website for Prestige Assets Mgnt LLC, a name which is almost identical to that of the registered investment adviser Prestige Asset Management LLC. [1]

The regulator alleges that while the website is phony and does not represent a licensed dealer or investment adviser, it was built to look authentic, and actually directed users to the registered firm’s office location and CRD number. [1]

According to the SEC, scams to be on the lookout for include not only “spoofed websites” like this one, but also fake social media profiles soliciting investments directly from users, as well as cold calls aided by technologies that trick victims into thinking the call is coming from a licensed firm. [2]

These scams all operate by posing as a licensed investment adviser or firm, only to solicit and steal sensitive customer data and ultimately, money. While these schemes are dangerous to anyone who unknowingly comes across them, they often pose a distinct danger to those who are less technologically inclined or do not take sufficient care to validate a firm or adviser’s credentials. Of course, fraudsters take careful steps to impersonate advisers, which makes investor vigilance even more critical.

So, what are the best ways to protect yourself and your wallet?

Awareness is a great place to start. Being armed with the knowledge that fraudsters are increasingly posing as licensed investment advisers can go a long way as you choose an adviser. Along with this awareness, paying close attention to potential red flags is also prudent.

Prominent red flags that may point to a fraudulent scheme include the guarantee of high investment returns, unsolicited offers from unknown senders, and requirements to make payments with either credit cards or cryptocurrencies. Typically, a licensed and registered investment firm will not accept investments via credit cards, nor will they require the use of a cryptocurrency or other digital asset wallets. [2]

In addition, if payment is conducted through a wire transfer or check, investors should always confirm that payment is not being sent to someone other than the firm, and that the address is indeed an office building or other reasonable location in which the firm could operate. [2]

Advisers themselves can also help protect investors from fraudsters by periodically checking that they are not being impersonated online or otherwise. Tactics like google image searches for company logos and google alerts to notify when an adviser’s name or other business information is used without authorization can be pivotal in identifying fraudsters. [2] If an adviser notices potential impersonation, they can report the concerns to FINRA BrokerCheck, as well as to the SEC or securities regulator in their state.

Finally, as a general rule, a broker or investment adviser should be registered with the SEC or a state regulator before they are licensed to give advice to retail investors. Prospective investors can verify that their investment adviser is currently licensed by using the search tool available on Investor.gov. It’s also prudent to contact the adviser through a second means not provided directly by them, to verify they are indeed who they say they are. [1]

Both awareness of these scams and alertness to potential red flags can help protect your money as an investor, or your business reputation as an adviser. If you have any questions or believe you may have been impacted by a scam like these, please reach out to us.

Sources: [1] https://www.barrons.com/advisor/articles/fraud-impersonating-advisors-protect-data-51628797073?st=hc56ha5ls4gyhvn [2] https://www.sec.gov/oiea/investor-alerts-and-bulletins/fraudsters-posing-brokers-or-investment-advisers-investor-alert