Investor Alert: Beware of Stock Recs on Research Websites
The Office of Investor Education and Advocacy (OIEA) of the Securities and Exchange Commission (SEC) issued an Investor Alert to enlighten investors about the pitfalls of stock recommendations and related research on websites and elsewhere.
“Seemingly independent commentary on investment research websites may in fact be part of paid stock promotion campaigns.” That article on an investment research website may not be objective. The writer may have been paid to promote a company’s stock and even deny so in print.
The SEC recently charged 27 parties with fraud for promoting stocks where the writer failed to disclose payment, used a pseudonym or faked credentials.
Schemes Can Be Anywhere
Stock promotion schemes might be on social media sites or in the form of newsletters, advertisements, direct mail, email, newspapers, magazines, TV and radio– even texts and tweets.
“If a company’s stock is promoted more heavily than its products or services, this may be a red flag of investment fraud.” Note that microcap stocks (including penny stocks and nanocap stocks) have a documented history of stock promotion schemes.
- See Investor Bulletin: Microcap Stock Basics (Part 3 of 3: Risk).
What to Do
- Never make an investment based solely on information published on an investment research website.
- Carefully review all investment related materials available to you towards the goal of verifying what is presented as research.
- Before making an investment: always background check an adviser at IAPD. And always background check a broker-dealer at FINRA BrokerCheck
For more info and resources read the full Investor Alert: Beware of Stock Recommendations on Investment Research Websites April 10, 2017
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