To avoid scams perpetrated over the Internet, the following is recommended: Check the site’s statements through an independent source. Never, ever make an investment based solely on what you read in an e-newsletter or other information published in a newsletter or blog, especially if the investment involves a small, very low-marketing company that is not well known.
A company or its promoters can easily make great statements about new product developments, lucrative contracts, or the financial health of the company. Before investing, be sure to verify these statements from an independent source. Start by turning to unbiased sources, such as the SEC, your state’s securities regulator, and self-regulatory organizations in the securities market (including the NYSE, Amex, and Nasdaq).
Do some research.
Securities trading offers must be registered with the SEC or eligible for an exemption otherwise the offer is considered illegal. To see if an investment is registered, check the SEC’s database and call your state’s securities regulator for more information about the company and its promoters. The fact that a company registers the investment securities it trades and files a report with the SEC does not necessarily guarantee that the company in question is a good investment, in the same way, the fact that a company does not register its securities or Reporting does not mean the company is a fraud either. But keep in mind that many investment scams, including scams perpetrated online, involve stocks or securities that have not been registered so do your research before investing.
Be skeptical of self-referrals.
Fraudsters will falsely assure you that a particular investment is correctly registered with the relevant agency and will demonstrate their intention to give you the agency’s phone number so that you can verify that information. ” Sometimes they will give you the number of the real agency but other times they will make up a name. But even if the agency exists, the contact information they provide will invariably be false. With this information, instead of communicating with a government official, you will talk to one of the scammers or one of their colleagues who will give you the best references about the company, the developer or the transaction.
Thoroughly verify the promoters and directors of the company.
Many of the fraudsters are repeat offenders. On all occasions that the SEC sues an individual or entity, the agency issues a statement reporting the case in dispute. The list of cases in litigation includes the lawsuits filed since 1995 and can be consulted on the Internet in the “litigation releases” section of the agency’s website, www.sec.gov/investor/espanol.shtml. Do a search by entering the name of the promoter, your company or newsletter, or the name of the promoted company and its executive and managerial employees. You can also review the history of disciplinary sanctions and issues related to the license of the person or entity promoting the investment opportunity by using NASD’s free service called rokerCheck or by calling your state’s securities regulator.
Find out where the shares are traded or traded.
Many small companies with a very low level of commercialization cannot meet the necessary requirements to be included in the list of companies that are listed on a national stock market. Instead, the shares or securities of these companies are traded on the over-the-counter market, also called the secondary market (over-the-counter market or OTC market) and are traded through over-the-counter systems, such as the OTC Bulletin Board or the Pink Sheets. Stock trades that are traded on the OTC market are generally the riskiest and turn out to be the most susceptible to manipulation.
Beware of high-pressure sales pitches.
Beware of promoters who pressure you to act without giving you the time to think about the investment or to do a full investigation of an investment opportunity. Don’t fall into the trap believing that you will miss out on your “chance of a lifetime” to earn big money if you don’t act quickly. Remember: if an opportunity seems too good to be true, it probably is.
Consider the source of the references and be skeptical.
When a stranger offers you first-hand information to make money from an investment, ask yourself: Why me? Why is this stranger giving this information to me? How will you benefit if I make the transaction? Never forget that the person promoting the investment may be an individual from the same company or a paid promoter who will see a great profit if you make the transaction.