The top 10 scams.

Investors lose billions of dollars each year to investment fraud, said Ralph Lambiase, president of the North American Securities Administration Association. In its annual survey of state securities regulators, NASAA asked them to identify the top 10 scams, schemes and scandals they thought they were likely to face in 2004. At least five can involve agents and brokers. Here's the list from the association's Web site:

1. Ponzi Schemes. A favorite among con artists, these promise high returns to investors and channel money from new investors back to previous investors.

2. Senior Investment Fraud. Regulators say older investors are being targeted with increasingly complex investment schemes that can involve unregistered securities, promissory notes, charitable gift annuities, viatical settlements and Ponzi schemes, all promising big returns, the NASAA reported.

3. Promissory Notes. These are short-term debt instruments often sold by independent insurance agents and issued by little known or nonexistent companies. They promise rentals of more than 15% a month, with little or no risk, but often the issuer has no intention or capability of delivering those returns, the association said.

4. Unscrupulous Brokers. Despite the health of the stock market, security regulators are still receiving many complaints from investors who accuse their brokers of "cutting comers or resorting to outright fraud to fatten their wallets," the association said.

5. Affinity Fraud. Seam artists will use a victim's religious or ethnic identity to gain his or her trust and then steal the victim's IRe savings. The NASAA cited a November 2003 California case in which five family members were arrested for defrauding evangelical Christians of $160 million in three years. The victims were promised returns of 25% within three months, but the con artists used the money for high living, buying a yacht and a helicopter, the association said.

6. Insurance Agent Securities Fraud. High commissions can lure some independent insurance agents into selling fraudulent or high-risk investments, such as promissory notes, ATM and pay-phone investment contracts and viatical settlements, NASAA said. Scammers continue to entice agents into selling investments they may know little about, said Lambiase.

7. Prime Bank Schemes. Here, con artists promise investors triple-digit returns through access to the investment portfolios of the world's elite banks, NASAA said. Some promoters avoid specific reference to prime banks, instead calling these schemes "risk-free guaranteed high-yield instruments."

8. Internet Fraud. Federal Trade Commission figures claim that cyber frauds stole $122 million in 2002, NASAA said. The Internet has made it simple for a con artist to reach millions of potential victims at minimal cost, and many of the cyber schemes are only online versions of age-old, offline scams, the association noted. One of the most common: the e-mail pitch from people identifying themselves as African government or business officials and asking for help in depositing large sums of money in overseas bank accounts.

9. Mutual Fund Business Practices. Mutual fund trading practices have lately been called into question. State and federal investigators have discovered sales contests in which brokers have steered investors to funds paying higher commissions. Also under scrutiny are abusive trading practices, such as market-timing, that could cost buy-and-hold investors more than $5 billion a year, and late wading, an illegal practice that may cost investors $400 million a year, the association said.

10. Variable Annuities. As sales of these insurance products have increased significantly in the past 10 years, so have investor complaints. The benefits of variable annuities--including tax deferral and death benefits--come with conditions and extra costs, the association pointed out. "Regulators are concerned that investors aren't being told about high surrender charges and the steep sales commissions agents often earn when they move investors into variable annuities," the association's report said. "Some investors also are misled with claims of guaranteed returns when variable annuity returns actually are vulnerable to the volatility of the stock market."