finra

FINRA

For Release:
Contacts:
Tuesday, October 23, 2007
Nancy Condon (202) 728-8379
Sarah Bohn (202) 728-8988

 

 

FINRA Identifies Energy Stocks as Latest "Pump and Dump" Scheme

Washington, D.C. — The Financial Industry Regulatory Authority (FINRA) issued an Investor Alert today warning investors to be wary of energy-related stock "pump-and-dump" scams that entice investors to purchase stocks that promise exponential price growth.

The new Investor Alert, "Save Your Energy and Money—Don't Fall for Energy Stock Scams," explains these energy stock scams typically involve small unknown companies, using a combination of baseless price predictions, misrepresentations and hyperbole. The goal of these scams is to inflate the price of the stock through false and misleading statements that create unwarranted demand for the company's shares. The con artists behind the scam can then sell off their shares, leaving investors with worthless stock.

"The latest pump-and-dump schemes involving oil, gas or alternative energy stocks are of great concern to us," said FINRA CEO Mary L. Schapiro. "We issued this Alert to remind investors to be skeptical and to investigate the company and its claims before investing."

The Alert warns investors about fax, email and even cell phone text message scams that promise high returns in exchange for little risk. One fax promoted, "It is easy to conclude that everyone should have an alternative energy stock in their portfolio."

In a spam message, another outfit trumpets that a certain Texas energy firm has "teamed up with China's $23 billion oil monopoly," and promises that huge returns are in store for those with the wisdom and foresight to invest 'RIGHT NOW!'

"If you have $5,000 in the S&P 500 and you ride it out for the rest of the year, you'll walk away with $5,700," the spam message continues. "But put that $5,000 into this Texas dynamo and you'll stuff your pockets with $26,500 in as soon as four months."

Not all energy investment pitches are as over-the-top as this, and in fact some of them are legitimate. The Alert recommends that investors ignore unsolicited faxes or emails and offers tips on how to avoid being taken in. In addition to giving investors detailed advice on how to distinguish stock scams from legitimate opportunities, the Alert also offers tips on how to make sound decisions and where to go to learn more about a company or stock before investing in it.

FINRA encourages investors to report these scams by forwarding stock spam emails to spam@finra.org, where the information will be reviewed for possible investigation.

 

For additional information, see the FINRA Investor Alerts Stock Spams and Scams, "I hope this is your email" Scam Offers No Hope of Profits, and Beware of "Hot" Stock Tips on Your Cell Phone. More information is also available in the Securities and Exchange Commission publication Oil and Gas Scams: Common Red Flags and Steps You Can Take to Protect Yourself; in the North American Securities Administrators Association's Alert: Oil and Gas Investment Fraud, and in the Federal Communications Commission publication Fax Advertising—What You Need to Know.

To receive FINRA's Investor Alerts and other important investor information via email, sign up for FINRA's Investor News.

FINRA, the Financial Industry Regulatory Authority, is the largest non-governmental regulator for all securities firms doing business in the United States. Created in 2007 through the consolidation of NASD and NYSE Member Regulation, FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business—from registering and educating all industry participants to examining securities firms; writing and enforcing rules and the federal securities laws; informing and educating the investing public; providing trade reporting and other industry utilities; and administering the largest dispute resolution forum for investors and registered firms. For more information, please visit our Web site at www.finra.org.