Which step helps an investor avoid fraudulent schemes?
о
a.) Checking the terms and conditions of an investment
opportunity before investing
b.) Investing only in investments that assure low risk and low
о return
O
O
c.) Investing only in securities that are protected by
Securities Investor Protection Corporation (
SIPC
)
insurance
d.) Investing in securities only if they receive a written
reference from the existing investors in
the scheme

Investors can avoid fraud by utilizing mechanisms like guarantees, warranties, and reputation as seen in goods markets, along with cosigners and collateral in the financial capital market.

Explanation:

Mechanisms to Reduce the Risk of Imperfect Information: Investors can avoid fraudulent schemes by seeking assurances such as guarantees, warranties, and service contracts, similar to buyers in goods markets relying on reputation for product quality. In the financial capital market, mechanisms like cosigners and collateral serve as insurance against unforeseen events.

Learn more about Investor Protection Against Fraudulent Schemes here:

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