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Commerce Commissioner warns of investments that sound too good to be true

February 02, 2012


For Immediate Release

ST. PAUL, MN – Following the Federal Reserve’s recent announcement that interest rates are expected to remain low until at least late 2014, the Minnesota Department of Commerce today cautioned investors to beware of risky or outright fraudulent investments promising higher yield or returns.

“Low interest rates on fixed investments create a climate ripe for fraudsters to prey on Minnesotans dependent on the returns,” said Commissioner Mike Rothman. “Unfortunately, some unscrupulous scammers understand the financial woes of their victims and seek them out, promising low risk and high returns.”

Commissioner Rothman said that the Commerce Department is concerned that individuals who depend on fixed income investments, particularly seniors, may be tempted to turn away from their slower growing, but safe, investments to alternative investments without understanding the risks and terms.

All investments carry a degree of risk. The level of risk usually is related to the return that investors can expect to receive. Investments with higher yields or returns carry a higher risk to investors; the lower the risk, the lower the yield or return.

“When evaluating any investment, it pays to remember that risk and reward go together,” said Commissioner Rothman. “Anyone promising high yield or high returns with little or no risk should be approached with a high degree of skepticism.”

The Commerce Department noted that yield-starved investors may be more easily enticed into fraudulent schemes that can be cloaked as private placement offerings, promissory notes, securitized life settlement contracts and investments in energy, precious metals and distressed real estate, all of which top the list of Top Investor Traps.
          
If you are concerned that you may be a victim of a scam or if an investment sounds too good to be true, the Commerce Department encourages all investors to ask the following questions:

  • Does this investment sound too good to be true? Use common sense and get a professional, third-party opinion when presented with investment opportunities that seem to offer unusually high returns in comparison to other investment options.

  • Did you have enough time to make the decision?  Ask for written information that fully explains the investment. The documentation should contain enough clear and accurate information to allow you or your investment adviser to evaluate and verify the particulars of the investment.

  • Were you given confidential, “inside information”, or a limited offer?  These phrases are often used in fraudulent investments to encourage a quick investment decision.

  • Are the seller and investment licensed and registered in Minnesota? The Commerce Department can tell you if they are. If they are not, they may be operating illegally.

If you have questions or want to report suspicious activity, the Commerce Department’s Consumer Help Line can be reached by phone at (651) 296-2488 or (800) 657-3602.  Questions or consumer complaints can also be sent by email to consumer.protecion@state.mn.us or by mail to the Minnesota Department of Commerce, 85, 7th Place East, Suite 500, Saint Paul, MN 55101.