Path to investment success lined with hidden traps

Abstract

Purpose

The purpose of this paper is to remind investment company compliance professionals of common traps for unwary investors, to emphasize the importance of detecting and preventing fraud in the marketplace that may affect individual investors, and to review basic investor rights and the importance of suitability for investment company clients.

Design/methodology/approach

The paper explains the constant danger of investment fraud, lists the North American Securities Administrators Association's (NASAA's) top ten investor traps for 2007, reviews questions investment sales professionals should ask themselves concerning the suitability of every investment for a given client, and lists rights to which investors should be entitled before they make every investment.

Findings

The paper finds that the path to safe investing is littered with pitfalls likely to catch unwary investors. Investment fraud is on the rise. Before offering any investment, sales professionals should ask themselves several key questions. Investors can avoid becoming trapped in a fraudulent or unsuitable investment by recognizing that they have certain rights and demanding that these rights be upheld before they invest.

Practical implications

Compliance professionals should remember that the underlying purpose of most state and federal regulations governing investment companies is centered on investor protection and concerned with investment suitability and fraud prevention.

Originality/value

The paper provides useful information with regard to the pitfalls likely to catch investors who want to make successful investments.

Citation

Borg, J. (2007), "Path to investment success lined with hidden traps", Journal of Investment Compliance, Vol. 8 No. 3, pp. 71-74. https://doi.org/10.1108/15285810710824116