Test your investment fraud IQ
Think you're a genius when it comes to spotting investment frauds? Answer these 10 questions and see how well you score. Select only one answer for each question.
1. Who insures investments?
a) The Securities and Exchange Commission
b) Federal Deposit Insurance Corporation
c) State security regulators
d) None of the above
2. What is a promissory note?
a) A note that "promises" your investment is safe.
b) A legitimate loan if it is broadly marketed to many people, over the Internet, for example.
c) A kind of security.
d) An investment that promises to deliver high rates of return over a short term.
3. Which statement is true about insurance agents and investments?
a) Are allowed to sell many kinds of investments because they are licensed to sell insurance.
b) Sometimes make high commissions by persuading people to make certain investments.
c) Only sell investments that are 100% percent backed by their company.
4. Before investing in a friend's investment, you should ...
a) Get in on the deal as quickly as possible so you do not lose the opportunity.
b) Take the time to find out all you can about it, even if it means missing out on the investment.
c) Check with your state security regulator or the Securities and Exchange Commission to make sure it can be legally sold in your state.
d) Both finding out all you can and checking with your state security regulator or SEC.
5. What is a viatical?
a) A road constructed by the ancient Romans
b) A garment worn by the clergy
c) A small blood vessel
d) An agreement to purchase another's life insurance policy
6. The most important thing in deciding about an investment is your personal connection to the person offering it.
7. As an investment, gold coins:
a) Are rare, so they're bound to be valuable.
b) Always go up in value at a good rate.
c) Are a good investment because of the gold content.
d) Can be a good investment, but only if you are knowledgeable about them.
8. Which of these statements about variable annuities is true?
a) Is a good addition to any investor's portfolio.
b) Allows you to withdraw your investment whenever you want, with no penalty.
c) Is not usually a good investment for older people.
d) Begin producing regular payments whenever you decide you need the money.
9. Which is a true statement about pyramid schemes?
a) Offers investors a free trip to Egypt.
b) Can only go on for a short time before investors lose out.
c) Is a good way to make money, because it just keeps growing.
d) Guarantees that you will at least make your principal back.
10. Which of the following lines should make you nervous about an investment?
a) "You'll get a much higher rate of return than other investments."
b) "You must act quickly."
c) "This is risk free."
d) All of the above
1. d) None of the above
2. c) A kind of security
3. b) Sometimes make high commissions by persuading people to make certain investments
4. d) Both finding out all you can and checking with your state securities regulator or SEC
5. d) An agreement to purchase another person's life insurance policy
6. b) False
7. d) Can be a good investment, but only if you're knowledgeable about them
8. c) Is usually not a good investment for older people
9. b) Can only go on for a short time before investors lose out
10. d) All of the above