Social Consensus: Red Flag of Fraud

By Patricia Uceda, Spring 2015 Graduate Research Assistant

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In order to help investors better recognize the red flags of investment fraud and avoid becoming victims, FINRA has released another short video dealing with a common red flag of fraud: social consensus. You can watch it here.

The social consensus tactic works by preying on your ability to be influenced by others. A fraudster will try to make you believe that other people you know have already invested in the product. Often this other person will be someone well-known and financially savvy, luring the investor into a false sense of security. Or it could be someone very similar to you, in the same position as you, such as friends or family. This can also create a false sense of security, as the investor may believe that they are missing out if they don’t also invest.

It’s important to keep in mind that just because it may seem like everyone is doing something, doesn’t mean you have to join in. Everyone’s situation is different, and the fact that the fraudster is trying to influence your decision with this type of information is a huge red flag of fraud.

Understanding these common fraud tactics can help you avoid becoming a victim. Visit SaveAndInvest.org/FraudCenter for more tools and resources on fighting investment fraud.