With Hurricane Season coming up, concerns regarding natural disasters can
weigh on anyone’s mind. There is something else you should worry
about, though: scammers. During this time, some scammers may try to take
advantage of this difficult situation. It is important to be aware of
potential schemes that falsely promise investors large gains.
After something happens—such as a hurricane—there may be plenty
of unsolicited messages regarding new opportunities related to the latest
natural-disaster. Some of the past instances of these scams have included
promotions regarding stock price run-ups based on the rise in demand to
repair homes. A majority of these scams involve clean-up and rebuilding
efforts, as well as those that are purported to take advantage of increased
oil and gas costs and refinery issues.
Hurricane Season is a popular time for pump-and-dump fraud schemes as investors
are recommended investments in businesses involved in home repair. As
soon as the price of stocks spike, fraudulent brokers sell their shares
for a profit. They stop recommending the stock and the price falls, meaning
investors are often left with essentially worthless stocks.
The Financial Industry Regulatory Authority (FINRA) has provided tips to
spot the potential Hurricane Season scams and how to avoid becoming a
victim. These scams are often promoted via unsolicited text messages,
emails, and via other communication. They usually include predictions
of rapid growth and facts from news sources to help their claims. It may
mention contracts or associations with large, recognized companies or
government agencies, as well as corporate developments. They may use calls-to-action
that pressure the investor to react quickly and hype up the investment
to cause a spike in stocks.
You should avoid these types of situations and FINRA’s latest tips
show you how:
Do your research – Just because you receive claims regarding an investment doesn’t mean
they’re all true. Make sure you do your research on the claims being
made so you’re not pressured into the investment. Take the time
to find out who runs the companies promoting the investment and if they
have a history of complaints. You can try and contact the company directly
as this may often turn up any a non-working phone number or fake address.
Determine where the stock trades – In many instances, these types of scam stocks are not traded on any of
the registered national securities exchanges. The may use over-the-counter
quotation platforms. This is because companies must meet the minimum listing
standards required to have their stocks on the registered exchanges.
Read SEC filings – The Securities and Exchange Commission (SEC) has reports filed by most
public companies. Individuals can use the agency’s EDGAR database
to check whether the company promoting the stock is filing with the SEC.
These reports can help you verify necessary information. Pay close attention,
though, because it doesn’t guarantee that the company is a good
Be sure to watch out for potential scams and if you believe you are receiving
fraudulent investment information, contact the SEC or your state securities