Which of the following is NOT considered a red flag of a Ponzi scheme?

The correct choice highlights that an investment demonstrating inconsistent returns coinciding with fluctuations in the financial markets is not necessarily a red flag of a Ponzi scheme. Traditional market behavior can lead to varying investment returns based on legitimate economic factors, and many investments experience ups and downs due to market volatility. A Ponzi scheme, in contrast, typically offers consistent, attractive returns regardless of market conditions, primarily relying on attracting new investors to pay returns to earlier investors.

In contrast, the other options reflect characteristics that are often associated with Ponzi schemes. For example, a financial manager who has control over all aspects of the investment, including managing and retaining custody of the funds, can prevent oversight and increase the risk of fraud. Additionally, a financial manager exerting unusual pressure on investors can indicate a lack of transparency and potential manipulation, fostering an environment conducive to fraudulent practices. Lastly, an investment promising extremely high returns with little risk is inherently suspicious, as it contradicts the basic principles of investing where higher rewards usually come with higher risks.

Thus, recognizing that option B is about the natural variance in investment returns due to market conditions clarifies why it does not belong as a red flag when identifying potential Ponzi schemes.