The Financial Industry Regulatory Authority (FINRA) recently issued a fraud alert, warning investors about the increased risk of financial fraud in the wake of Hurricane Irma. In particular, recovering Floridians may be targeted by unsolicited calls, emails or other forms of communication regarding investments in hurricane-related schemes.
Common Investment Scams
The fraud alert focused on common post-storm stock and investment schemes that pitch clean-up and repair services as well as “scientific and technological breakthroughs” for the remediation of flood-related damage. FINRA warned investors not to respond to unsolicited offers that promise rapid and exponential growth.
In some cases, these scams may involve claims that callers either have contracts, or are affiliated with federal agencies or disaster relief companies. Callers often rely on “facts” reported in news sources to support claims of increasing stock prices, and use high-pressure sales tactics to lure investors.
Given the fact the FINRA felt compelled to issue the alert, it is likely that the state and federal authorities will be focusing on these types of scams, a form of white collar crime. These are nonviolent, financially motivated crimes that are often committed by white collar professionals, such as investment advisers.
Avoiding Post Hurricane Investment Scams 101
The FINRA alert also provided advice on how survivors of natural disasters could avoid becoming victims of a potential financial scam:
- Identity the caller since individuals that promote stock are either insiders or are paid to do so. Also, request written statements to determine if cash payments are made in exchange for the dissemination of investment information about a company.
- Investors should do their own research, and not rely on unsolicited investment information provided by callers claiming to be analysts or account executives. FINRA’s BrokerCheck® system can be tapped to verify the registration status of investment advisers and firms.
- Determine where the stock trades. Most unsolicited stock offers do not meet the listing standards of major U.S stock exchanges like the New York Stock Exchange (NYSE), and are frequently quoted on an over-the-counter (OTC) platform such as the OTC Bulletin Board (OTCBB). These standards include minimum net worth requirements and numbers of shareholders.
- Before investing in any stock, investors should always read any SEC filings or other financial reports to verify any information about an investment.
The Takeaway
As Floridians continue to grapple with the remains of Hurricane Irma, they may become the targets of a wide range of investment scams, warns FINRA. In any event, fraud is a white collar crime that is vigorously prosecuted in the state. Whether authorities are currently conducting fraud investigations remains to be seen, however. Nonetheless, if you are under investigation or have already been charged with a white collar crime, it is crucial to engage the services of an experienced white collar criminal defense attorney.