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Investor Alert:  Beware Investment Offers Implying SEC Endorsement

06/24/2013

The SEC's Office of Investor Education and Advocacy is issuing this Investor Alert to help investors identify fraudulent investment offers made by firms purporting to have met with the SEC, including in international locations (such as Dubai). SEC staff is aware of a number of fraudulent schemes where the person offering the so-called investment refers to meetings with the SEC as a way of convincing potential investors that the fraudulent investment opportunity is legitimate. The SEC does not "approve" or "endorse" any particular securities, issuers, products, services, professional credentials, firms, or individuals, and does not allow private entities to use its government seal.

While staff of the SEC regularly meets with public companies, regulated entities, and others, the SEC never endorses an investment.  Any claim – stated or implied – that the SEC has endorsed an investment is false and is likely part of a fraudulent scheme.

In addition to the above tactic that fraudsters may use to trick investors, the following "red flags" indicate that an investor should proceed with extreme caution:

  • The promise of "guaranteed" returns with little or no risk.
    Any investment that sounds too good to be true probably is. Compare promised returns with the returns on well-known stock indexes. Any investment opportunity that claims you'll receive substantially more than that could be highly risky – or be an outright fraud. Every investment entails some level of risk, which is reflected in the rate of return you can expect to receive. You'll most likely get a low return for investments that have low risk. Most fraudsters spend a lot of time trying to convince investors that extremely high returns are "guaranteed" or that the investment "can't miss." Don't believe it. A claim of guaranteed high returns with little or no risk is very likely a fraud.
     
  • Use of terms such as "high-yield investment" and "prime bank."
    The Internet is awash in so-called "high-yield investment programs" or "HYIPs."  These are unregistered investments typically run by unlicensed individuals – and they are often frauds. The hallmark of an HYIP scam is the promise of incredible returns at little or no risk to the investor.  A HYIP website might promise annual (or even monthly, weekly, or daily) returns of 20 or 30 percent – or more.  Some of these scams may use the term "prime bank" program.  If you are approached online to invest in one of these HYIPs, you should exercise extreme caution – the "investment" is likely a fraud.
     
  • Unsolicited offers to invest via the Internet and social media.
    Investment fraudsters look for victims on social media sites, chat rooms, and bulletin boards. If you see a new post on your wall, a tweet mentioning you, a direct message, an e-mail, or any other unsolicited – meaning you didn't ask for it and don't know the sender – communication regarding a so-called investment opportunity, you should exercise extreme caution. An unsolicited sales pitch, particularly via the Internet or social media, may be part of a fraudulent investment scheme.

Ask Questions and Check Out Everything

Be skeptical and research every aspect of an offer before making a decision. Investigate the investment thoroughly and check the truth of every statement you are told about the investment. Never rely on a testimonial or take a promoter's word at face value.  You can check out many investments using the SEC's EDGAR filing system or your state's securities regulator. You can check out registered brokers at FINRA's BrokerCheck website and registered investment advisers at the SEC's Investment Adviser Public Disclosure (IAPD) website. See our publication "Ask Questions"  for more information you should gather before making an investment.

Related Information

  • The SEC maintains lists of unregistered soliciting entities that have been the subject of investor complaints.  The lists, collectively called PAUSE (Public Alert: Unregistered Soliciting Entities), are available at http://www.sec.gov/investor/oiepauselist.htm.
  • For additional investor educational information, see the SEC's website for individual investors, Investor.gov.

To report a possible securities fraud, ask a question, or report a problem concerning your investments, your investment account or a financial professional, please visit http://www.sec.gov/complaint/select.shtml.

To receive the latest Investor Alerts and Bulletins from the SEC's Office of Investor Education and Advocacy, sign up for our RSS feed here or for email here.  You can also follow us on Twitter @SEC_Investor_Ed, or visit Investor.gov, the SEC's website dedicated to individual investors.


The Office of Investor Education and Advocacy has provided this information as a service to investors. It is neither a legal interpretation nor a statement of SEC policy. If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law.