![]() Sounds too good to be true.Exercise caution if the investment sounds too good to be true.Pressure to buy RIGHT NOW.Be skeptical if the promoter pitches the investment as a "limited time only" opportunity, especially if the promoter claims to base the recommendation on "inside" or confidential information.Be highly suspicious if the promoter guarantees you a high rate of return on your investment. When considering any potential investment, watch out for these warning signs of investment fraud: Be careful if someone tries to get you to subscribe to a newsletter and then calls you with specific investment recommendations. The newsletter publisher may make money based on the amount of shares its subscribers buy.Įven if a newsletter makes specific disclosures about being compensated for promoting a stock, be aware that fraudsters may include such disclosures to create the false appearance that the newsletter is legitimate.įraudsters may also use newsletters as a way to get their foot in the door to pitch fraudulent investments by phone. Be careful if a newsletter representative asks you detailed questions about your stock purchases like how many shares you bought, when you purchased the shares, or which broker you used to buy the shares. Be wary if the newsletter’s disclosures are difficult to find or appear in tiny, hard-to-read print. "From time to time, the Newsletter may receive compensation from companies we write about." "From time to time, the Newsletter or its officers, directors, or staff may hold stock in some of the companies we write about." "The Newsletter receives fees from the companies we write about." The following examples raise red flags because they do not contain specific information: Be skeptical of newsletters that do not specifically disclose who paid them, the amount, and the type of payment. ![]() Be suspicious if the newsletter does not disclose having received any compensation. If a newsletter promotes a particular stock, read carefully what the newsletter says about compensation it receives and look for these red flags: For example, you may purchase a stock (causing the stock price to rise) and then the newsletter publisher may sell its shares of that stock (profiting at your expense). ![]() Even if you do not give the newsletter publisher any money to place trades for you, the newsletter publisher may profit from your trading activity. Do not take comfort because a newsletter encourages you to purchase or sell a stock through your own brokerage account. Some investment newsletters claim to be sources of unbiased information, when in fact the newsletter publisher will make a lot of money if the newsletter convinces investors to buy or sell particular stocks. False performance claims – misrepresenting the track record of the newsletter’s investment recommendations.Undisclosed conflicts of interest – falsely claiming to provide independent analysis or failing to explain conflicts of interest (or biases), including financial incentives, that may influence the investment recommendations. ![]() Scalping – recommending a stock to drive up the stock price and then selling shares of the stock at inflated prices to generate profits." Pump and dump" schemes – pumping up a company’s stock price by making false and misleading statements to create a buying frenzy, and then selling shares at the pumped up price.Touting – promoting a stock without properly disclosing compensation received for promoting the stock.While many investment newsletters are legitimate, some are used to carry out schemes designed to deceive investors. Others may provide commentary and analysis about particular companies, investment products, or financial trends. Some newsletters address general securities topics, such as which types of stocks, bonds, or funds might make good investments. They may be found online or in hard copy they may be available for a fee or free of charge. Investment newsletters come in many forms. The SEC’s Office of Investor Education and Advocacy is issuing this Investor Alert to help investors avoid fraudulent schemes that may be carried out through investment newsletters. ![]()
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