March 15th, 2010 
Tushar Mathur One sure-fire way to avoid being taken in by an unsolicited recommendation is to ignore it-regardless of how it comes in. Someone claiming to be an unbiased observer-whether in a fax, email, text message or blog post-could very well be a paid promoter or con criminal. Especially online, a single person can use multiple aliases to create the illusion of widespread interest.
To steer clear of potential scams, follow these tips.
Consider the source. Never rely solely on information you receive in an unsolicited fax, email, text message or tweet-or in a blog post or online thread. It’s easy for companies or their promoters to make glorified, unsubstantiated claims about new products, lucrative contracts, or the company’s revenue, profits, or future stock price.
Always ask: “Why me?” Another tip-off that you’re potentially being scammed is that the message is unsolicited, which raises the obvious question: Why would a total stranger tell you about a really great investment opportunity? The answer is that there is no such opportunity. In many scams, those who tout the stock are corporate insiders, paid promoters or substantial shareholders who profit handsomely if the company’s stock price goes up.
Exercise some skepticism. Scammers are very adept at making their pitches appear real, including the use of slick videos and Web sites. Be extremely wary of any pitch that suggests immediate pay-offs, especially if the investment involves a start-up company or a product or service that is still in development. Even technologies that show promise might be years or decades away from coming to market-let alone turning a profit.
Find out where the stock trades. Most unsolicited recommendations involve stocks that cannot meet the listing requirements of a major national exchange, such as The Nasdaq Stock Market or the New York Stock Exchange. Instead, these stocks are usually quoted on the OTC Bulletin Board (OTCBB) or in the Pink Sheets. There are important differences between the OTCBB and the Pink Sheets and The Nasdaq Stock Market or a stock exchange. For instance:
There are no minimum financial and other quantitative standards that must be met by a company to have its securities quoted on the OTCBB or in the Pink Sheets. While OTCBB issuers must remain current in their filings with the SEC or applicable regulatory authority, many Pink Sheet companies have no obligation to file annual or quarterly reports or to publicly disclose current material information.
Check out the person touting the stock or investment. A legitimate investment salesperson must be properly licensed, and his or her firm must be registered with the Financial Industry Regulatory Authority (FINRA), the SEC or a state securities regulator-depending on the type of business the firm conducts. To check the background of a broker, use FINRA BrokerCheck. For an investment adviser, use the SEC’s Investment Adviser Public Disclosure Web site. Also, be sure to call your state securities regulator. You can find that number in the government section of your local phone book or by contacting the North American Securities Administrators Association (NASAA).
If a Problem Occurs
If you believe you have been defrauded or treated unfairly by a securities professional or firm, please send us a written complaint. And if you suspect that someone you know has been taken in by a scam, be sure to give us that tip. Here’s how:
Online:
File a Complaint (for you)
Send a Tip (for others)
Mail or Fax:
FINRA Complaints and Tips
9509 Key West Avenue
Rockville, MD 20850
Fax: (866) 397-3290
Source: Finra.org
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