How To Spot A Ponzi Scheme

It’s too late for those caught up in the Madoff mess but not too late for the next one to come around. And there’s always a next one to come around.

Here’s, via the WSJ, is how to make sure that you don’t wind up in one of our slideshows.

  • Look out for an investment manager who wants complete control of your money, and asks for checks to be made out to him or a company he controls.
  • Make sure that the funds are held separately, in custody at a big broker-dealer firm regulated by the Financial Industry Regulatory Authority and backed by the Securities Investor Protection Corporation. You can contact that firm directly to make sure it has your money, and you can check it out through FINRA. Get copies of your statements directly from the broker.
  • Ideally your adviser manages your investments, but the funds are actually held at, say, Charles Schwab or Fidelity. That way it’s almost impossible for him or her to run a Ponzi scheme.
  • Say no to any broker who “guarantees” investment performance, boasts a track record that looks amazing, or who tries to hustle you aggressively into investing.
  • Double-check any investment record that looks too steady over the long term: Ponzis like to keep the boat steady to avoid redemptions.

FOR FULL MADOFF COVERAGE, CLICK ON BERNIE’S FACE >


See Also: A SLIDESHOW OF MADOFF’S VICTIMS HERE >

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