Following the announcement that interest rates are expected to remain low until 2014, the North American Securities Administrators Association (NASAA) has cautioned investors to beware of risky or possibly fraudulent investments promising higher yield or returns.
The NASAA stresses that investors must “evaluate any investment [and that] it pays to remember that risk and reward go together.” As Wall Street blogger Bill Singer has agreed, yield starved investors have to take extra care not to fall prey to fraudulent schemes after eyeing “the miniscule number to the left of the % sign.”
NASAA’s current list of Top Investor Traps includes schemes cloaked as private placement offerings, promissory notes, securitized life settlement contracts and investments in energy, precious metals and distressed real estate.
In light of the dangers facing restless investors, the NASAA has advised that people use common sense, get a third opinion and ask for clear disclosure documentation such as a prospectus or offering circular. As a last ditch attempt, they urge investors to call their provincial or state regulator in order to verify the seller and investment in question.
Singer, who posted comments about the recent NASAA release, has applauded the foresight of the NASAA in their attempt to curb investor fear and irrationality, but has likened their lackluster advice to that of firefighters who “…having sounded the fire alarm, then answer [the] 911 calls with the regret that there aren’t enough fire trucks.”
In response to the three options given by the NASAA, Singer has asserted that he doesn’t believe there are any credible regulatory professionals who believe that a clear and accurate system of disclosure documentation exists.
He labels the advice to use common sense and get a third party opinion as tired and unrealistic, and rather than have people try in vain to connect to a state regulator, would like to see the creation of public sector phone numbers staffed with competent government employees.