Beware Of Asset Recovery Firms

The Department of Financial Institutions joins with the Attorney General’s Office to alert financial fraud victims to use caution when approached by companies promising, for a fee, to help them recover their money or bring the perpetrator to justice. Typically, the targeted investors have already lost thousands of dollars, perhaps their entire life’s savings, to fraudulent investment schemes.

Department of Financial Institutions Securities Division Director Shonita Bossier said some firms are charging exorbitant fees for what the victim could accomplish alone for free, things like making calls or filing complaints. And worse, they give investors false hope that recovery of funds is a sure thing, when it may actually be very unlikely.

An advisory can be found at http://kfi.ky.gov recommending victims use caution. The advisory includes information to help investors understand how third-party asset recovery firms operate and areas to consider if approached by such a firm, including: its fees; how its investigation will be conducted; what legal services it provides; how it coordinates with securities regulators; and its discussion of recovery.

Third-party asset recovery firms typically approach fraud victims through an unsolicited telephone call or email promising to recoup lost investment funds for an upfront fee or percentage of recovered funds. Many advertise they can provide legal assistance, but if they do not have an attorney on staff, they cannot file a lawsuit on behalf of the victim. Many are unable to negotiate beyond a demand letter.

Once hired, the firm may send demand letters to the perpetrators of the initial investment scheme, then file a boilerplate complaint with state and federal regulators on behalf of the defrauded investor. However, these are steps an investor could undertake without assistance.

The advisory states that often the information contained in these complaints relates to companies that are no longer in business, have filed for bankruptcy or have already been subjected to previous regulatory action. Sometimes the complaints are based upon information that is too old for legal action. So on top of losses as a victim, the investor could additionally be out the cost of hiring the company if no money is recouped.

Bossier said many people don’t realize how easy it is to file a securities complaint in Kentucky. The Securities Division has a form online, and staff is available to help you fill it out. It’s really unnecessary to pay for help, and there’s no reason to make yourself more vulnerable.

If you have a complaint against an investment company or professional, contact the Department of Financial Institution’s Securities Division at 800-223-2579 or visit http://kfi.ky.gov/complaint/Pages/securities.aspx.