FINRA Warns Investors Against ‘Follow-Up’ Scams

The Financial Industry Regulatory Authority (FINRA), the largest independent regulator for all securities firms ‎doing business in the United States, today warned investors against companies or associations that approach victims of investment fraud claiming that, for a fee, they can help them recover the sums invested or the losses incurred on unlawfully operating trading platforms.

Take the lead from today’s leaders. FM London Summit, 14-15 November, 2016. Register here!

This type of activity is typical of the fraud mechanism known as a ‘recovery room’. Although some federal agencies could help people who have lost money, they don't charge a fee, guarantee to get money back, or give special preference to anyone who files a formal complaint.

The regulator cautions investors, who live outside the U.S. in particular, that some of these offers may be fraudulent because it is often very difficult to track down the person or group that has scammed them.

The alert notes that scam artists buy and sell lists of previous victims so that they can call them promising to recover the money that they lost or profits they never received - for a fee in advance.

Gerri Walsh, FINRA's Senior Vice President of Investor Education, said in the statement: “While it's very enticing to hear you might be able to recover money lost from a previous investment or investment scam, some investors end up losing even more money to unregistered con artists who run so-called ‘recovery scams'."

"Fraudsters can paint a very credible story to persuade you to send money in advance to get back at least some of what you originally lost. But the sad fact is that the money you send may itself be lost for good,” he added.

Red flags for not being scammed again

These recovery scams are simply defrauding the victims one more time, and according to FINRA, consumers should look for some red flags. In most cases victims are contacted by someone impersonating a government official or pretending to be affiliated with FINRA or designated by them to perform investigations or other services.

They use a variety of lies to add credibility to their pitch: some falsely use the name of a real person or firm that is registered with FINRA, or urgent correspondence and high-pressure calls are received from entities or persons claiming to represent companies or government agencies. In addition, once the victim shows interest, a series of official-looking documents are sent to assure the investor that money is waiting in an account and can be recovered for a fee.