Investing in foreign currency can be a legitimate way to make money. But it’s not for the average investor. And certainly not appropriate for unsophisticated investors.
Yet a lot of people looking for a winner in the weak market conditions in the U.S. and abroad will be snared.
It is high season for opportunistic scams and con artists who use news headlines to snare their victims.
That “is one thing that investors can always count on,” says Karen Tyler, North Dakota securities commissioner and president of the North American Securities Administrators Association.
Don’t let your desperation for better returns cause you to fall for a fraud, warns NASAA, whose membership consists of state securities administrators.
Tyler said the pitches will come from two types of predators: Typical fraudsters and unscrupulous registered and licensed financial professionals trying to boost their commissions or fees.
Take, for example, the Iraqi dinar scam. In this con, promoters promise double-digit returns to investors. The promoters tell people that democracy in Iraq and the ensuing peace will stimulate the economy and drive up the value of the post-Saddam Hussein dinar. The Better Business Bureau has seen a substantial increase in complaints about the dinar scam.
The Idaho Department of Finance, which shut down one promoter selling Iraqi dinars, warns that investments in foreign currencies — particularly when it involves unstable countries — are highly risky.
How risky? Oh let’s see:
• Volatile exchange rates.
• Thin or nonexistent markets.
• Financial instability and opaque government monetary policy.
• The possibility that the currency you receive could be fake.
At a time like this, it is equally important for you to question recommendations from registered professionals. You should question advice to change your investment strategy based solely on current market conditions.
So how can you protect yourself? At the least, follow these three tips:
• Ask for everything in writing.
• Hang up the telephone, delete the e-mail or ignore the advertising if the investment is pitched as being low risk with a high return.
• Call your state securities regulator before you do anything.
To find contact information for your state securities regulator, go to YourRegulator.cfm.
The Better Business Bureau suggests that before you invest, make sure your broker or financial advisers are licensed to sell securities.
Michelle Singletary singletarym@washpost.com
