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Regulators Warn of Securities Scams

Stock market slide creates opportunity for con artists

January 30, 2008

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State securities regulators are reminding investors not to allow recent negative economic news and stock market volatility lead them into high-risk speculative investments, which may be nothing more than fraudulent schemes hiding behind today’s headlines.

“Scamsters follow the news and often prey on investors’ fear to promote bogus investments with promises of high return and little or no risk,” said North American Securities Administrators Association (NASAA) President and North Dakota Securities Commissioner Karen Tyler.

Tyler also said investors nearing retirement are particularly at risk of being targeted by phony investment schemes promising high returns to make up for losses in retirement accounts.

NASAA said it is concerned that investors may allow uncertainty over current market conditions to lead them into fraudulent investment schemes that could weaken or devastate their financial position, potentially wiping out the retirement security they worked so hard to build.

“Whether the markets are up or down, there are always those who will attempt to prey on the investing public,” Tyler said. “Investors should guard against high-pressure sales pitches for unregistered securities and non-traditional investments such as foreign currency, oil and gas investments, exotic financial products, or offers to send their money offshore to so-called ‘safe havens.’”

Tyler reminded investors to:

• Hang up on aggressive cold callers and delete unsolicited e-mail messages promoting investments opportunities with little or no risk.

• Contact their state or provincial securities regulator to check that both the seller and the investment are licensed and registered. If they aren’t, don’t invest. Contact information is available on the NASAA website (www.nasaa.org).

• Request written information about any investment; carefully review it or ask your financial adviser to evaluate it.

• Use common sense. Get-rich-quick promises are usually signs of investment fraud.

• If you suspect you’ve been scammed, report it to your state or provincial securities regulator. Your call could help others from losing money.

Tyler also noted that legitimate financial professionals, if serving their client’s interests first, generally do not recommend changes to investment portfolios based on short-term economic news and market volatility.

“Investors, especially those nearing or in retirement, should view with great skepticism any recommendation to liquidate a well-structured, diversified investment portfolio to fund the purchase of an alternative investment product that may expose them to high commissions, high fees, excessive complexity, and undue risk,” Tyler said.

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