The U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) warned investors about an alarming spike in the number of spam e-mails linked to “pump-and-dump” stock schemes.
In an investor alert entitled Inbox Alert – Don’t Trade on Pump-And-Dump Stock E-mails, the SEC said the latest McAfee Threats Report confirms the increase in “pump-and-dump” stock schemes and also warns that the bogus claims could also be dispersed via social media. Investors should also be wary of such schemes on Facebook, Twitter, bulletin boards, and chat room pages.
Pump-and-dump schemes are generally easy to spot if investors know what to expect.
Promoters of such shenanigans often say they have “inside” information about a forthcoming development or event, usually regarding a microcap stock, and try to validate the legitimacy of the claim by saying their system of picking is foolproof.
When the fraudsters have rallied enough hype to “pump” the price of the stock, they profit by selling their shares and leave misled investors with worthless stock. The SEC says the best response to unsolicited investment spam is to “hit delete.”
“Spam e-mail is the bait used to lure people into making bad investment decisions. No one should ever make an investment based on the advice of an unsolicited email,” said Cameron Funkhouser, executive vice president of FINRA’s Office of Fraud Detection and Market Intelligence.
The SEC offered additional resources for more information:
» FINRA Investor Alert: Stock Spams and Scams
» SEC Investor Alert: Social Media and Investing – Avoiding Fraud
» SEC Publication: Pump&Dump.con: Tips for Avoiding Stock Scams on the Internet
» SEC Publication: Ask Questions: Questions You Should Ask about Your Investments
To report a possible securities fraud, ask a question, or report a problem concerning investments, an investment account or a financial professional, the SEC directs investors here: http://www.sec.gov/complaint/select.shtml.
Investors can also visit www.investor.gov.
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