Securities Department Outlines What to Expect and Offers Guidance on How to Protect Yourself
Oklahoma City/// Amid the ongoing COVID-19 pandemic, the Oklahoma Department of Securities is alerting investors to be on guard against an anticipated surge of fraudulent investment schemes.
“In these extraordinary times, the health and welfare of everyone must be our foremost concern, and that includes our financial health. The Department's primary focus remains on the protection of retail investors,” said Melanie Hall, Administrator of the Oklahoma Department of Securities. “In a crisis, con artists will come out of the woodwork with scams to cheat people out of their money just when they need it the most.
In particular, the Department warns investors to be on the lookout for investments specifically tied to the COVID-19 crisis. Bad actors can be expected to use schemes that falsely claim to raise capital for companies developing new testing methods, distributing vaccines, or manufacturing miracle cures. “The schemes may appear legitimate because they draw upon current news, medical reports and social and political developments. In addition, the schemes will require minimal sophistication by the scammer,” Hall said. “Don't be fooled by a professional-looking website. Anybody can create a website that looks legitimate.”
The North American Securities Administrators Association, of which the Department is a member, anticipates the number of fraudulent investment schemes will rise as a result of the ongoing pandemic. “Investors will be targeted by scammers who will try to take advantage of the downturn in the economy, individuals' concerns about the stock market, and low interest rates," said Hall. Investors must be alert to protect themselves.”
Anticipated schemes that may arise as a result of the pandemic include:
Private securities offerings. Scammers will take advantage of concerns with the regulated securities market to promote private deals. These schemes will continue to pose a threat to retail investors because private securities transactions are not subject to review by federal or state regulators. Retail investors must continue to investigate before they invest in private offerings and independently verify the facts for themselves.
Gold, silver and other commodities. Fraudsters may also take advantage of the decline in the public securities markets by selling fraudulent investments in gold, silver and other commodities that are not tied to the stock market. These assets may be attractive to purchasers because they are often promoted as "safe” or “guaranteed”. However, scammers may conceal hidden fees and
other costs, and the illiquidity of the assets may prevent retail investors from selling the assets for fair market value. The bottom line is there really aren't any “can't miss” opportunities.
Recovery schemes. Retail investors should be suspicious of buy-low, sell-high recovery schemes. For example, scammers will begin promoting investments tied to the energy sector, encouraging investors to purchase interests in oil wells now so they can recognize significant gains after the price of oil rebounds. Investors need to appreciate the risks associated with any prediction of future performance and recognize that the profitability of their investments may not be tied to gains in the securities markets.
“Get-rich-quick” schemes. Scammers will develop these schemes to focus on the increased numbers of unemployed workers. The con artists falsely promise quick, guaranteed returns that can be used to pay rent, utilities or other necessary expenses. The con artists will also target retirees and senior citizens by dishonestly claiming they can quickly and safely regain any losses in their retirement portfolios. Remember: if it sounds too good to be true, it probably is.
Liquidation and reinvestment schemes. Investors should beware of any unregistered person encouraging them to sell their investments and use the proceeds to invest in “stable, more profitable” products. Investors may pay considerable fees when selling the investments, and the new products often fail to provide the promised stability or profitability. Follow a disciplined approach to investing and avoid the temptation to chase returns to make up for losses.
The Department provides the following guidance and tips to help unsuspecting consumers and investors. In connection with COVID-19, remember that there are no miracle cures. Scientists and medical professionals have yet to discover a vaccine or means to cure the virus. You should not send money or make payments over the phone or on-line to anyone claiming they can prevent the virus, or have a vaccine or treatment.
Unfortunately, white-collar criminals may pose as charities soliciting money for those affected by COVID-19. Before donating, you should independently verify any charity that is raising money for the sick or securing donations to help uninsured persons pay for medical care. You should also avoid on-line solicitations for cash and gift cards, as these schemes have become a popular way for scammers to steal money.
As the federal government begins sending checks to the public as part of its economic stimulus effort, keep in mind that the government will not require the prepayment of a processing fee or any other type of charge. More importantly, no federal or state government agency will call you and ask for your personal information. Don't give out or verify any personal information to any caller.
“Retail investors must remain cautious and protect themselves,” said Hall. “If you don't initiate a contact, you can't be sure who you are dealing with on the other side. Investors should always ask if the salesperson and the investment itself are properly registered.” This information can be confirmed by the Department. Investors also can check the SEC's Investment Adviser Public Disclosure database, or FINRA's BrokerCheck.
Oklahomans are encouraged to contact the Department with questions about any investment opportunity, or the person offering it for sale, before investing in the product. For more information, visit www.securities.ok.gov or call the Department at (405) 280-7700. Anyone who believes they have been contacted by someone engaging in investment fraud is also advised to contact the Department.