FINRA Issues Alert Warning Investors of Stock Fraud Following Hurricane Harvey

WASHINGTON — FINRA issued an Investor Alert today warning investors to beware of potential scams touting stocks and other investments promising huge financial gains in the wake of Hurricane Harvey.

The Investor Alert, Beware of Stock Fraud in the Wake of Hurricane Harvey, explains how investors can spot and protect themselves from investment scams associated with the clean-up or rebuilding of the devastated areas.

"Financial fraud routinely follows on the heels of a disaster in the form of unsolicited emails, texts, phone calls, messaging apps and social media communications,” said Gerri Walsh, FINRA’s Senior Vice President of Investor Education. "While some opportunities may be legitimate, others may be misleading or purely fraudulent. Investors should be wary of investment pitches touting high returns, lucrative contracts, cutting-edge technology or other claims tied to prospering in the aftermath of Hurricane Harvey.”

Pitches by con artists frequently include price targets or predictions of exponential growth; the use of facts from respected news sources to bolster claims of a price run-up; mentions of contracts or affiliations with federal agencies or large well-known companies; standard corporate developments presented as major events; statements about how much easier it is for low-priced stocks to skyrocket in value in comparison to higher-priced stocks; and pressure to invest immediately.

In order to avoid potential scams, investors should take these steps to make an informed decision about these financial opportunities.

• Investigate before you invest. Never rely solely on information received in an unsolicited email, text message, or cold call from an “analyst” or “account executive.”
• Find out who sent the message. Many companies and individuals that tout stock are corporate insiders or are paid to promote the stock. Look for statements (usually found in the fine print) that indicate cash payments or the receipt of stock for disseminating a report on the company.
• Find out where the stock trades. Most unsolicited stock recommendations involve stocks that can't meet the listing requirements of the Nasdaq Stock Market, the New York Stock Exchange or other U.S. stock exchanges.
• Read a company's SEC filings. Most public companies file reports with the SEC. Check the SEC's EDGAR database to find out whether the company files with the SEC. Read the reports and verify any information you have heard about the company. But remember the fact that a company has registered its securities or has filed reports with the SEC doesn't mean that the company will be a good investment.

If you are suspicious about an offer or if you think the claims might be exaggerated or misleading, please contact us.

Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA's BrokerCheck or by calling (800) 289-9999. In 2016, members of the public used this free service to conduct 111 million reviews of broker or firm records. Investors can also call FINRA's Securities Helpline for Seniors at (844) 57-HELPS for assistance with concerns or questions about their brokerage accounts and investments.

FINRA is dedicated to investor protection and market integrity. It regulates one critical part of the securities industry – brokerage firms doing business with the public in the United States. FINRA, overseen by the SEC, writes rules, examines for and enforces compliance with FINRA rules and federal securities laws, registers broker-dealer personnel and offers them education and training, and informs the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers a dispute resolution forum for investors and brokerage firms and their registered employees. For more information, visit www.finra.org.