FINRA has joined with the SEC issuing an alert warning investors of scams that are exploiting the oil spill in the gulf. Scammers are “promising financial gains from investments in companies that claim to be involved in cleanup operations.”
Along with the warning, FINRA provides several tips to avoid these type of scams. First, FINRA suggests that you thoroughly investigate a company or individual before investing. Unfortunately, individuals rely on information that comes in an unsolicited correspondence sent via facsimile, email or even text message. This information often contains misrepresentations and glorified claims regarding the company’s revenues, profits, contracts, or future stock price. FINRA suggests reading the fine print and finding out who sent the information. Do your research and do not rely solely on unsolicited information.
Second, FINRA advises that you should find out where the stock trades. Many of these unsolicited recommendations “involve stocks that do not meet the listing requirements of the major stock exchanges.” Rather, they are often quoted on the OTC Bulletin or in the Pink Sheets. In that case, there do not exist minimum qualitative standards and likely trade infrequently, which may make it more difficult to sell any shares that you acquire. Further, when these type of shares do trade they often experience rapid price changes.
In addition, you should consider a company’s SEC filings. You can check a company’s filings in the SEC’s EDGAR database. Be aware, however, that just because a company has made filings with the SEC it doesn’t mean that investing in the company is a good idea.
Finally, use common sense and be skeptical. Remember if it is too good to be true it likely is. Look past the pitches and the theatrics and ask serious questions regarding the investment. Make sure that you also do independent research, looking beyond the salesperson and company for information regarding the investment. Also, take extra care where the investment allows immediate pay-offs, especially when the company is in its start-up phase or the service provided is still in development.
Unfortunately, scammers are often really good at promoting their “investments.” Remember this is your hard earned money and don’t ever invest in something that you haven’t thoroughly researched.
If you believe that you are a victim of investment fraud and would like information about your legal rights, please call our firm for a free consultation.
Jason Doss is the owner of The Doss Firm, LLC, an Atlanta-based law firm devoted to representing consumers across the country in a variety of areas including investment disputes and consumer class action litigation. Mr. Doss earned his J.D. from Florida State University in 2002 and his B.A. from the University of Florida in 1997.