1. Non-Traded REITs: A Real Estate Investment Trust (“REIT”) is a vehicle that buys and operates properties or mortgages, such as homes, shopping malls, offices or even storage units.
2. Ponzi Schemes: A scam that usually promises high returns, but where the returns to earlier investors are paid with monies raised from later investors. Ponzi schemes were named for Charles Ponzi, a man who raised millions of dollars from investors in a stamp scheme, but in fact was just paying early investors with money raised from later investors. The largest Ponzi scheme to date was operated by Bernard Madoff.
3. Variable Annuities: Essentially a long term insurance investment “wrapped” around mutual funds, variable annuities are very complex insurance products. Typically, brokers are paid very high commissions, which is often the reason they are “sold” to investors, not sought out or “bought” by investors.
4. Promissory Notes: Promissory notes are often used as a promise to pay investors a higher than average fixed rate of interest, often based on the promises of a generally unknown or little known private company that claims to be very successful. Most often these promissory notes are debt offerings that are not registered with the Securities and Exchange Commission (SEC).
5. Financial Advisor Fraud: Every year, investors become the victims of stockbrokers, financial advisors, financial consultants or other registered representatives who overpromise returns, misdescribe the risks of an investment, recommend inappropriate investments, or even perpetrate fraud when dealing with their clients.