NEW YORK (MainStreet) — Investing is hard enough without walking into a bear trap set by an unscrupulous fraudster. Crooks create false account statements, make wild performance claims and operate elaborate Ponzi schemes in order to get money out of your pocket and into theirs. If you're the victim of such a crime, what are your chances of getting your money back?
The U.S. Securities and Exchange Commission (SEC) recently issued an investor bulletin explaining the ways in which conned consumers can attempt to recover assets lost to criminal investment scams. The good news: there are a number of ways to recover your money. The bad news: you are likely to recover only a portion of your loss – and be prepared for a lengthy process.
"Not all harmed investors will be able to recover money, and many of those who recover money receive less, often substantially less, than their losses from the securities fraud," the SEC says. "In addition, even when harmed investors are able to recover money, the process for distributing the money to harmed investors may take a long time."
If an SEC investigation into securities fraud is successful, enforcement action is initiated through the court system or by an agency administrative proceeding. In addition to attempting to reclaim the proceeds from the fraud on behalf of victims, often penalties and interest are charged; the court or the SEC will determine the distribution of these assets. In other cases, a receivership is formed to recover and manage the proceeds of criminal collections. In fiscal year 2013, the SEC collected more than $1.6 billion in fines and recovered investment assets.
When a brokerage firm fails, investors' assets are covered by the Securities Investor Protection Corporation (SIPC). Securities held at the broker-dealer are protected up to $500,000; cash is protected up to $250,000, but only for the value held – assets are not protected from market loss. And this protection is only offered for customers of firms who are members of the SIPC.
Investors who have suffered losses from fraud may also find recourse under federal bankruptcy laws or private class-action lawsuits.
The SEC conducts hundreds of investigations each year and says many violations pertain to the misrepresentation of investments, price manipulation, theft, insider trading or the sale of unregistered securities. A substantial number of these actions are spurred by tips from the public, consumer complaints and whistleblowers. Recent scams have targeted seniors, involved oil and gas companies, gold mining investments and speculative startup companies. Often investors are lured into such schemes on the heels of major news events, including rackets based on the recent Ebola outbreak.
Additional resources are available at the SEC website.
--Hal M. Bundrick is a Certified Financial Planner and contributor to MainStreet. Follow him on Twitter: @HalMBundrick