TSSB action highlights investment risks

This week, the Texas State Securities Board issued disciplinary orders against two Corpus Christi investment advisors.

Jimmy Wayne Freeman Jr. and Kris Bradford Rhoden were accused of selling securities that they were not licensed to sell. Those securities were back by National Life Settlements LLC, a company that had been shut down and forced into receivership in 2009 by the State Securities Board and Office of the Attorney General, and its owners indicted in Harris County.

According to a release from the TSSB, the type of securities Freeman and Rhoden were selling “typically involves a third party’s sale of interests in all or a portion of the proceeds of a life insurance policy. Investors receive a return payable from the proceeds when the insured dies.”

The release goes on to say that such securities have drawn more than their fair share of frauds and scammers.

In light of this news, BBB warns consumers to be diligent when deciding on investment opportunities and on the lookout for scams.

The following red flags indicate that an investment opportunity may not be what it promises:

  • Requires a large upfront investment. Untrustworthy schemers might try to convince consumers to pay a lot of money upfront so they can get out of town with a large haul, rather than wait for the funds to trickle in.
  • Promises high returns for low risk. Every investment comes with a level of risk. Typically the amount of risk increases with the potential return on the investment. If the seminar is trying to sell an investment scheme that claims a high return with little or no risk, beware, even if it comes with the promise of a money-back guarantee.
  • Employs high pressure sales tactics. Seminar leaders often use high pressure sales tactics to get consumers to sign up without thinking it through. They might claim there are only a few spots left or that getting in immediately will see the greatest returns. Any reputable investment company will let consumers take their time to do research and will not pressure for an immediate decision.
  • Relies on off-shore investments. Presenters may try to give their scheme an air of sophistication by relying on overseas investments such as foreign currency, property, stocks and bonds. They might also claim, incorrectly, that taxes can be avoided by investing overseas.
  • Sounds too good to be true. Generally, if the offer sounds too good to be true, it probably is. The potential payoff is rarely worth the risk.

~ Amy

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