The Corporation Commission released an annual list of top investor threats and urged caution before purchasing popular and volatile unregulated investments—especially those involving cryptocurrency and digital assets. Also, the Commission announced guidance for investors, including steps to take to reduce the possibility of becoming a fraud victim in the new year.
The top 2022 threats to investors were determined by a survey of securities regulators conducted by the North American Securities Administrators Association (NASAA). The annual survey is designed to identify the most problematic products, practices or schemes facing investors. The following were cited most often by state and provincial securities regulators:
- Investments tied to cryptocurrencies and digital assets,
- Fraud offerings related to promissory notes,
- Money scams offered through social media and internet investment offers and,
- Financial schemes connected to self-directed Individual Retirement Accounts (IRAs).
Many of the fraud threats facing investors today involve private offerings, as federal law exempts these securities from registration requirements and preempts states from enforcing important investor protection laws. Unregistered private offerings are generally considered to be high-risk investments and do not have the same investor protection requirements as those sold through public markets.
The Commission urges investors are to practice the following tips to identify and avoid investment scams:
- Anyone can be anyone on the Internet. Scammers are spoofing websites and using fake social media accounts to obscure their identities. Investors should always take steps to identify phony accounts by looking closely at content, analyzing dates of inception and considering the quality of engagement. To ensure investors do not accidently deal with an imposter firm, pay careful attention to domain names and learn more about how to protect your online accounts.
- Beware of fake client reviews. Scammers often reference or publish positive, yet bogus testimonials purportedly drafted by satisfied customers. These testimonials create the appearance the promoter is reliable – he or she has already earned significant profits in the past, and new investors can reap the same financial benefits as prior investors. In many cases, though, the reviews are drafted not by a satisfied customer but by the scammer. Learn how to protect yourself with NASAA’s Informed Investor Advisory on social media, online trading and investing.
- If it sounds too good to be true, it probably is. Bad actors often entice new investors by promising the payment of safe, lucrative, guaranteed returns over relatively short terms – sometimes measured in hours or days instead of months or years. These representations are often a red flag for fraud, as all investments carry some degree of risk, and the potential profits are typically correlated with the degree of risk. Learn more about the warning signs of investment fraud.
The Corporation Commission recommends investors independently research the registration of investment firms and avoid the hyperlinks provided by the investment promoters. Instead, investors should contact the Investigator on duty at the Securities Division, search the SEC’s Investment Adviser Public Disclosure website or FINRA’s BrokerCheck platform. Investors should be aware that scammers may misappropriate the CRD numbers of registered firms and individuals.