FINRA Warns Investing Public of Green Energy Investment Scams

Washington, D.C. — The Financial Industry Regulatory Authority (FINRA) issued an Investor Alert today warning investors to be wary of green energy investments that promise large gains from investing in companies purportedly involved in developing or producing alternative, renewable or waste energy products.

The new Investor Alert, Save Your Greenbacks—Don't Fall for Green Energy Scams, explains how these green energy scams typically work. In some schemes, con artists are using everything from tweets and text messages to webinars and faxes to lure investors with very aggressive, optimistic and potentially false and misleading statements that create unwarranted demand for shares of a small, thinly traded company. This is a classic "pump and dump" fraud where con artists behind the scheme then sell off their shares, leaving investors with worthless stock. Fraudsters are also using green investing as a hook for Ponzi schemes, where a scammer uses incoming funds from new investors to pay purported returns to earlier stage investors.

"Right now there are a lot of legitimate stories in the news about green energy initiatives, and con artists want to leverage people's interest in green energy to make a quick buck at investors' expense," said John Gannon, FINRA Senior Vice President for Investor Education. "There is a lot of interest in companies that claim to provide green energy, but we issued this Alert to remind investors to be vigilant about avoiding investment scams, no matter how they are packaged."

The Alert warns investors to ignore unsolicited investment recommendations and to question the source of investment information. Investors should also be wary of investments that claim to be the next big thing and promise exponential returns. For example, in one recent pump and dump scheme, a solar stock was touted as "set for a 200 percent gain," and in another instance, a fraudster suggested that stock in a company involved in green patents could rise 1,000 percent or more.

Another red flag for a green scheme is a hard sell that pushes investors to go "all in" on a new investment initiative. In a recently alleged Ponzi scheme, investors were encouraged to liquidate their traditional investments, such as retirement plans stocks, bonds and mutual funds, and to borrow against their home or business, so that they could invest in one company's "green" initiatives. However, according to a complaint filed in federal court, the company did not generate any income from which the promised returns—ranging from 17 percent to "hundreds of percents" annually—could be made.

In addition to giving investors detailed advice on how to spot potential scams and distinguish frauds 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, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through comprehensive regulation. 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 firms.

For more information, please visit our Web site at www.finra.org.