State securities regulators have identified the top 10 frauds ensnaring average investors these days, including high-pressure telemarketing of risky stocks and scams using the Internet.
The list was released Friday by the North American Securities Administrators Association, known as NASAA, in connection with the start of a joint government-business campaign for investor education.
“America is facing a true financial literacy crisis, and what investors don’t know can hurt them,” said NASAA President Denise Voigt Crawford, who also is Texas’ securities commissioner. “Wall Street can be a mean street for people who aren’t careful with their money.”
With the stock market still booming, consumers need to get the facts, plan for the future and avoid fraud, state and federal regulators say.
Led by the Securities and Exchange Commission, a phalanx of federal agencies, securities industry groups and consumer organizations are promoting a saving and investing campaign stretching nationwide and from Canada to Chile.
They warn that 65 million American households could be stymied in achieving their life goals because of inadequate financial planning.
The week-long start of the campaign, from March 29 through April 4, will include an investors’ town meeting to be broadcast nationwide on the latter date. There also will be programs for children, young adults and senior citizens at the national and state levels and in 20 other countries throughout the Western Hemisphere.
On Monday, there will be a national roundtable in Washington on saving and investing with major figures from government, business, consumer groups and the media.
Here is NASAA’s list of the top 10 areas of fraud. They are not ranked in order of importance or other criteria:
Affinity group fraud: Investment scams targeting religious, ethnic and professional groups, perpetrated by members of the groups or people claiming to want to help them.
Asian-American communities in southern California, for example, recently have been targets of bogus investment schemes for precious metals and foreign currencies.
Internet fraud: Scams using the Internet that include stock price manipulation, illegal pyramid schemes, insider trading and acting as a broker or investment adviser without being properly licensed.
Abusive sales practices: Sales of securities to investors who can’t afford them, fraudulent securities offerings and market manipulation, often involving relatively cheap, high-risk “penny” stocks.
A year ago, state regulators made a “sweep” of penny-stock brokerage firms and brought 36 enforcement actions against 14 firms.
Investment seminars: Regulators are monitoring the proliferation of investment seminars and financial planners, watching for unlicensed activities and hidden fees and commissions.
Telemarketing fraud: High-pressure telephone operations, known as “boiler rooms,” selling penny stocks and other investments.
Municipal bonds: Risky municipal bonds secured by overvalued real estate that are marketed as “safe” general-obligation bonds.
Immigration investments: Sales of investments portrayed as conferring “alien immigration status” on foreign nationals seeking to emigrate to the United States.
Bogus franchise offerings: Fraudulent franchise investments often are sold at business opportunity and franchise shows.
High-tech products and services: Misleading or illegal sales of high-tech investments with promises of high profits and minimal risk, in areas such as 900 telephone numbers or the Internet.