Everyone who represents injured investors knows that they often lose more than just money. Defrauded investors, generally early retirees, are often older, penniless, and have little to no prospect for re-employment. They lose everything and have nothing. Some take on menial minimum wage jobs, are forced to sell their homes, and move in with their children. Many die as a result of stress by heart attack or stroke, and in more than a few cases, have committed suicide.

Finally someone has attempted to quantify these non-financial costs. Last year, the FINRA Investor Education Foundation commissioned Applied Research & Consulting LLC (ARC) to conduct a study to explore non-traditional costs of financial and investment fraud, including: indirect financial costs, such as legal fees, fees for bounced checks, opportunity costs, lost wages, etc.; and non-financial costs, such as stress, depression, frustration, anger, other psychological consequences, sleep deprivation, health issues, lost time, etc.

The study focused on financial and investment fraud in which the victim played an active role. Consumer frauds (e.g., fake weight loss programs, “work at home” scams) and other types of financially related fraud in which the victim did not agree to invest his/her money (e.g., identity theft, credit/debit card fraud) were not included in the research. It is also important to note that this study was not intended to address the issue of fraud prevalence. All participants were self-reported victims of financial fraud, therefore the research does not provide a measure of how often financial fraud occurs in the general population, or which types of fraud are more prevalent.

Instead, this study offers an in-depth look at financial fraud from the victim’s perspective—how victims experienced the incident, their reactions to the fraud and the potential indirect financial costs and non-financial consequences of having been victimized.

ARC Conducted a Nationally Distributed Online Survey

All victims surveyed were require to be 25 years old or older who have primary or shared decision making responsibility for their household’s financial investments and lost money in a fraudulent or potentially fraudulent incident.

Of those surveyed, nearly two-thirds sixty five report experiencing at least one type of non-financial cost to a serious degree, with fifty percent of respondents reporting they had experienced severe stress due to being defrauded. Nearly two in five or thirty eight percent reported difficulty sleeping, and more than one third or thirty five percent reported experiencing depression due to the fraudulent incident. Fraud victims who lose larger amounts of money are more likely to experience a greater number of non-financial costs. Slightly less than half of respondents, forty seven percent report incurring some type of indirect financial cost and at least twenty percent can pay their bills or make
ends meet.

Victims of financial fraud place a good deal of responsibility on themselves for the incident. Just under half, or forty seven percent blame themselves for being defrauded, and sixty one percent feel that they were defrauded because they were too trusting.

Financial fraud victims also report a variety of negative emotional reactions to the fraudulent incident, with anger being the most common (74%), followed by regret (70%), feeling victimized (69%) and feeling betrayed (68%).

Fight Back

Injured investors should not get mad, or blame themselves. Injured investors ought to try to get even, and I am sure most of them would say, if they were surveyed, while money might not cure all that ails them, it might sure make them feel better.

Guiliano Law Group

Our practice is limited to the representation of investors in claims, for fraud in connection with the sale of securities, the sale or recommendation of excessively risky or unsuitable securities, breach of fiduciary duty, and the failure to supervise. We accept representation on a contingent fee basis, meaning there is no cost to unless we make a recovery for you, and there is never any charge for a consultation or an evaluation of your claim. For more information contact us at (877) SEC-ATTY.

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