The document provides tips for preventing fraud and scams related to self-directed investments in individual retirement accounts (IRAs). It outlines several red flags for fraudulent investments including guaranteed returns, high pressure sales tactics, missing documentation, and complex investment strategies that are hard to understand. The document encourages investors to perform due diligence by understanding investment goals and risks, checking with regulators and professional advisors, and asking questions about products, fees, and the backgrounds of those selling investments. Common fraud schemes are described such as Ponzi schemes, pyramid schemes, and prime bank note fraud. Resources for finding help with potential fraud are also listed.

1. Don’t let your investment dollars
line the pockets of others
Scam & Fraud
Awareness

2. The Greatest Tools for Preventing
Fraud are Education and Knowledge
➣ Fraud, Scams, Ponzi schemes, and other rip-off tactics can be mitigated with due
diligence, awareness, and other tools.
➣ The Retirement Industry Trust Association (“RITA”) has implemented a campaign to
promote investor awareness, and offers the following tips before making any self-
directed investment in your individual retirement account (“IRA”).

3. Check BEFORE You Invest1
 Be sure your IRA investment is consistent with your investment goals.
 Understand that any investment outside of an FDIC-insured product is subject to risk
including loss of principal.
 Understand that neither Equity Trust Company or any governmental agency
endorses or guarantees non-FDIC insured investments.
 Fraudulent red flags including, but not limited to: guaranteed investment returns,
high pressure sales techniques, and too good to be true statements.
 Ask a trusted professional (such as your accountant, attorney or financial advisor)
for a second opinion.
 Be sure to utilize information and resources from: the U.S. Securities and Exchange
Commission (“SEC”), the National Association of State Securities Administrators
(“NASSA”), and the Financial Industry Regulatory Authority (“FINRA”).
1From the RITA, Check Before You Invest Checklist

4. Fraud Red Flags2
➣ Guarantees: Be suspect of anyone who guarantees that an investment will perform
a certain way. All investments carry some degree of risk.
➣ Unregistered products: Many investment scams involve unlicensed individuals
selling unregistered securities – ranging from stocks, bonds, notes, hedge funds, oil
and gas deals, or fictitious instruments, such as prime bank investments.
➣ Overly consistent returns: Any investment that consistently goes up month after
month – or that provides remarkably steady returns regardless of market conditions –
should raise suspicions, especially during turbulent times. Even the most stable
investments experience hiccups.

5. Fraud Red Flags Cont.
➣ Complex strategies: Avoid anyone who credits a highly complex investing
technique for unusual success. Legitimate professionals should be able to explain
clearly what they are doing. It is critical that you fully understand any investment that
you are seriously considering – including what it is, what the risks are, and how the
investment makes money.
➣ Missing documentation: If someone tries to sell you a security with no
documentation – that is, no prospectus in the case of a stock or mutual fund, and no
offering circular in the case of a bond – he or she may be selling unregistered
securities.
➣ A pushy salesperson: No reputable investment professional should push you to
make an immediate decision about an investment, or tell you that you must “act now.”
If someone pressures you to decide on a stock sale or purchase, steer clear. Even if
no fraud is taking place, this type of pressuring is inappropriate.
2FINRA, Investor Education Series “Avoiding Investment Scams”

6. Due Diligence is Your Ally
Against Scams and Schemes
“An informed and skeptical investor is the best
defense against fraud”
- SEC Chairman Mary Schapiro at the FINRA
Investor Education Foundation Conference,
November 3, 2011

7. Ask Questions3
➣ About Products
➣ Is this investment product registered with the SEC and my state securities
agency?
➣ How will this investment make money? (Dividends? Interest? Capital gains?)
Specifically, what must happen for this investment to increase in value?
➣ What are the total fees to purchase, maintain, and sell this investment?
➣ How liquid is this investment? How easy would it be to sell if I need my money
right away?
➣ Do you mind if I get a second opinion?
➣ About People Selling the Investment
➣ How long has the company been in business?
➣ May I have your business license number?
➣ Do you belong to the Chamber of Commerce?
➣ How long has your firm been in business?
➣ What state/country agencies are you registered with?
➣ What sort of references can you provide?
3SEC “Questions You Should Ask About Your Investments” & Fraudaid.com

8. Common Types of Fraud4
•Promise high financial returns or dividends not available through traditional investments.
•Instead of investing the funds of victims, the con artist pays “dividends” to initial investors using the
funds of subsequent investors.
“Ponzi” Schemes
•As in Ponzi schemes, the money collected from newer victims of the fraud is paid to earlier victims to
provide a veneer of legitimacy.
•In pyramid schemes, the victims themselves are induced to recruit further victims through the
payment of recruitment commissions.
Pyramid
Schemes
•Occurs when the victim pays money to someone in anticipation of receiving something of greater
value – such as a loan, contract, investment, or gift – and then receives little or nothing in return.
Advance Fee
Schemes
•Legitimate letters of credit are never sold or offered as investments.
•Letters of Credit are issued by banks to ensure payment for goods shipped in connection with
international trade. Payment on a letter of credit generally requires that the paying bank receive
documentation certifying that the goods ordered have been shipped and are en route to their
intended destination.
Letter of Credit
Fraud
•International fraud artists have invented an investment scheme that supposedly offers extremely high
yields in a relatively short period of time.
•In this scheme, they claim to have access to “bank guarantees” that they can buy at a discount and
sell at a premium.
•By reselling the “bank guarantees” several times, they claim to be able to produce exceptional
returns on investment.
Prime Bank Note
Fraud
4 FBI, Common Fraud Schemes

9. Finding a helping hand!
➣ SEC.org
➣ AARP.org
➣ FINRA.org
➣ IRS.gov
➣ NASAA
➣ Your local District Attorney Consumer Protection Office
➣ Your local FBI office
➣ Your local Postal Inspector’s Office (If mail was used in the fraud scheme.)
➣ Additional resources can be found at http://www.trustetc.com/scam-fraud-
prevention/resources.html