Stress created by high jobless rates. Acrimonious political debate over acceptable levels of federal assistance. Rampant fear and uncertainty while awaiting the arrival of an effective coronavirus vaccine.
These highly charged emotional times serve as a breeding ground for scams targeted at defrauding investors when they are most susceptible. In this uncertain economic climate, it is important to remember the timeless relevance of two old adages that apply to investor protection.
“The first one is, ‘If it seems to be too good to be true, it probably is,’” said Robert D. Conca, Esq., a Partner at Jacko Law Group.
“The second one is that if the words ‘guaranteed investment returns’ are used in any solicitation, it should raise a major red flag." Promised returns can look better than ever before, especially for those people who are struggling while dealing with the pandemic.
“COVID-19 is an example of a situation that allows the fraudsters, the spoofers, and the other bad actors to kick into high gear because people’s vulnerabilities are heightened.”
Valuable Online Tools
The Securities and Exchange Commission ("SEC") and the Financial Industry Regulatory Authority ("FINRA") have helped the investing public remain vigilant against potential fraud during these unprecedented times. Individuals and legitimate investment firms can avoid becoming victims of the potential scams that have increased during the current pandemic by being aware of the many resources the SEC and FINRA have made available.
To protect yourself against promises of guaranteed high investment returns and unsolicited investment offers and other nefarious activity, you can visit the robust Investor.gov website and review the page What you Can Do to Avoid Investment Fraud.
Another useful tool – The Investment Adviser Public Disclosure website - can be found at advisorinfo.sec.gov. Here, investors can search for an investment firm or investment professional and view the reporting and disclosure documents (“Form ADV”) filed by advisers. This site also will search the FINRA’s BrokerCheck system and indicate whether an entity is a brokerage firm and whether an individual is a registered representative of a brokerage firm.
FINRA also has a webpage with five important considerations for investors during the coronavirus pandemic.
“The overarching takeaway is that the investor has to be active,” Conca said. “John Q. Main Street and Mary Q. Main Street should not hesitate to ask a lot of questions. It’s all about checking on your investment professional. Perform due diligence. Kick the tires. There are very few legitimate operators who get upset when you ask them hard questions about their protections, controls, or details that just don’t seem right.
“If you have something to hide, there are a lot of ways to convey that in a conversation. If you don’t have anything to hide, you can field any question with relative diplomacy. Bluster or misdirection tend to be indicators that you should not do business with that individual.”
Here are links to a few of the SEC’s most recent fraud-related Investor Alerts:
- Broadly Advertised Investments – Investor Alert
- COVID-19 Related Early Withdrawals from Retirement Accounts—Be Careful of Fraudsters and other Bad Actors Targeting Your Retirement Savings
- Frauds Targeting Main Street Investors -- Investor Alert
Making Time for the SEC’s PAUSE List
Under U.S. securities laws, firms that solicit investors generally are required to register with the SEC and meet minimum financial standards in addition to disclosure, reporting, and recordkeeping requirements.
With that in mind, Registered Investment Advisors ("RIAs") should become familiar with the SEC’s frequently updated list of fraudulent impersonators Public Alert: Unregistered Soliciting Entities (PAUSE) list.
The SEC’s PAUSE Program lists entities that impersonate genuine U.S. registered securities firms and bogus regulators, governmental agencies, or international organizations. Inclusion on the PAUSE list, however, does not mean the SEC has uncovered violations of U.S. federal securities laws or made a judgment about the merits of any securities being offered.
“Impersonating RIA firms is pretty challenging to police because the impersonators will actually create phony websites with a similar, but not the same domain address,” Conca said.
Protecting Yourself and Your Clients
The PAUSE list and the SEC’s additional timely Investor Alerts demonstrate the SEC’s ongoing efforts to inform, educate and protect the industry and its clientele.
For added peace of mind when it comes to combating investor fraud, reach out to the professionals at Jacko Law Group to schedule a consultation session at 619.298.2880 or email@example.com.
Robert Conca has over 19 years of experience advising businesses and financial professionals. He has acted both in legal counsel and senior executive capacities for companies spanning all stages of development. From start-ups to ...
Add a comment
- SEC Proposes a Big Exemption to Assist Small Businesses in Raising Much-Needed Capital
- Strategic Guidance with JLG's General Corporate Counsel Service
- Recent Insider Trading Case at Amazon Offers Useful Reminders for Compliance Departments
- Navigating a Successful Merger or Acquisition
- Remaining Vigilant Against Investment Fraud During the COVID-19 Pandemic
- Starting a New Business? Don’t Overlook These Three Essential Considerations
- Starting Out: Mergers & Acquisitions (Part 2)
- Final California Consumer Privacy Act Rules Approved by OAL
- Integral Factors for Your Firm's Mock SEC Examination
- Starting Out: Mergers & Acquisitions (Part 1)
- Securities and Exchange Commission (SEC)
- Investment Advisers
- Due Diligence
- Transition Services
- California Consumer Privacy Act (CCPA)
- Aging Clients
- Policies and Procedures
- Advisers Act
- Virtual Currency
- Dodd-Frank Act
- Broker Protocol
- Office of Compliance Inspections and Examinations (OCIE)
- Ponzi Scheme
- Securities Law
- Form U5
- Private Equity
- Private Funds
- Regulation Best Interest
- Hedge Funds
- Regulatory Examinations
- Personally Identifiable Information (PII)
- Government Shutdown
- Risk Alert
- Social Media Marketing
- Exchange-Traded Funds (ETFs)
- Investment Company Act
- Rule 6c
- Wells Fargo