Running on the Financial Treadmill in 2015
~ By Gerald Rome, Colorado Securities Commissioner ~

Gerald Rome, Colorado Securities Commissioner
We’ve hit mid-February, which means that for many people the resolutions to which they so ardently committed a mere 6 weeks ago have begun to lapse. Those daily morning walks may only be happening on the weekends, and the weekend-only desserts are suddenly appearing on the table every night. Relaxing New Year’s resolutions is understandable, but I sincerely hope that you have remained devoted to one: financial security. Continuing last month’s list of risky investments for 2015, this month brings a new set of frauds that, sadly, we and our partners at the North American Securities Administrators Association (NASAA) are seeing more frequently:
- Real Estate Schemes: A business grabbing headlines, especially in Colorado, is the real estate market. According to the Denver Business Journal, Denver is the top commercial real estate market in the country, and one of the top residential. These reports make investing in real estate very enticing, but as with oil and gas investments, real estate carries with it a very high risk that many people don’t realize. Important aspects of real estate investments to research prior to any commitment are the source of repayment, appraisals, title reports, and company financials. While these investments typically promise returns several times higher than interest rates from a traditional institution, the risk they carry certainly matches the potential money gained.
- Oil and Gas Investments: Despite the recent downturn in oil prices, the market on investment scams is still booming. Particularly in states like Colorado where hydraulic fracturing or “fracking” is a contentious topic, con men seize on popular headlines to draw victims into large scale investments without properly communicating the high degree of risk involved. While oil and gas investments sound like a sure thing in today’s economy, what most people don’t understand is that these investments should only be made by those who can afford lose their entire principal, as this is a frequent occurrence. The use of high pressure sales tactics only add to the danger of oil and gas securities, so if you are approached make sure to step back, do some research, and evaluate your risk-tolerance before committing to anything or giving out any personal information.
- Private Placements: Private placements are investments mostly to a small number of chosen investors, and are often the most frequently cited as an area of fraud. No filings are required with either the SEC or state regulators until after sales are made to investors. Even then, regulators at the state level have little authority over these transactions unless fraud is discovered. Private Placement Offerings, ostensibly sold only to accredited investors, can now use public solicitation which makes them tricky investments for any but the most informed investor. While there are a number of legitimate firms offering private placement securities, investors must be wary and vigilant before committing any money.
As always, if you suspect that you or someone you know has become the victim of investment fraud, please contact the Colorado Division of Securities at (303) 894-2320.