BBB Tip of the Week

Ponzi schemes are run by con artists who pretend to be investment aficionados offering high returns on investments.

Instead of a tangible investment, the con artist uses the investment money from new investors to pay “dividends” to early investors. The scheme can continue until there are no longer any new investors or when enough investors try to cash out of the investment so that the “dividends” can no longer be paid, or when the con artist flees with the proceeds.

The Better Business Bureau and the SEC share the following red flags for Ponzi schemes:

• Promises of high returns with little or no risk.

• Consistently positive returns, no matter the market conditions.

• The investments are unregistered. Or the investment professional is unlicensed.

• Incomplete or confusing and complicated information on the investment strategy.

• The inability to get written information and/or errors on your account statement.

• Failure to receive a payment or problems cashing out of the investment.

• Encouragement to roll your investment over in order to get even higher returns.

The BBB offers the following tips and websites for avoiding Ponzi investment schemes: Association of Personal Financial Advisors ( www.napfa.org), the Financial Planning Association ( www.plannersearch.org), the Certified Financial Planner Board of Standards ( www.cfp.net), and the Investment Adviser Public Disclosure search webpage from the SEC ( www.adviserinfo.sec.gov).

• Check for complaints filed at the state securities regulators office for the individual or firm. For a list of state securities regulators visit www.nasaa.org/about-us/contact- us/contact-your-regulator/.

• Avoid investments that aren’t registered, seem too good to be true, are for obscure products, have no collateral backing and/or come unexpectedly from a stranger or unknown company.

If you are uncertain about a potential or current investment, discuss it with a securities and investment fraud lawyer.

If you suspect a Ponzi scheme, you can report it at www.sec.gov/complaint /tipscomplaint.shtml or call the SEC at (800) 732-0330.

For more tips you can trust, visit the BBB’s blog at www.bbb.org/blog/ or call (509) 455-4200.

By Erin T. Dodge, BBB editor