October 8, 2006 2:09 AM
How To Avoid Internet Investment Scams
You should be skeptical of investment opportunities you learn about through the Internet. When you see an offering on the Internet – whether it's on a company's website, in an online newsletter, on a message board, or in a chat room – you should assume it's a scam until you've done your homework and proven otherwise.
Get the facts before you invest, and only invest money you can afford to lose. You can avoid online investment scams by asking – and getting answers to – these three simple questions:
Is the investment registered?
To find out, check the SEC's EDGAR database. Some smaller companies don't have to register their securities offerings with the SEC, so always check with your state securities regulator. You'll find that number in the government section of your phone book. Or call the North American Securities Administrators Association (NASAA) at (202) 737-0900 or visit NASAA's website.
Many online investment scams involve unregistered securities. But the fact that a company has registered and files reports with the SEC doesn't guarantee that the company will be a good investment. Likewise, the fact that a company hasn't registered and doesn't file reports with us doesn't mean the company is a fraud. You may be asking for serious losses if you invest in a small, thinly traded company that isn't widely known solely on the basis of what you read on a bulletin board posting or saw in an online newsletter. One simple phone call o your state regulator could prevent you from squandering your money on a scam.
Is the person licensed and law-abiding?
Find out if the person or firm selling the investment needs to be licensed. Call your state securities regulator and ask whether the person or firm is licensed to do business in your state and whether they have a record of complaints or fraud. You can also get this information by calling NASD's public disclosure hotline at (800) 289-9999 or visiting their website.
Does the investment sound too good to be true?
If it does, it probably is. High-yield investments tend to involve extremely high risk. Never invest in an opportunity that promises "guaranteed" or "risk-free" returns. Watch out for claims of astronomical yields in a short period of time. Be skeptical of "off-shore" or foreign investments. And beware of exotic or unusual sounding investments, especially those involving so-called "prime bank" securities. To learn more about "prime bank" securities, visit the Division of Enforcement's Prime Bank Fraud Information Center on our website.
Make sure you fully understand the investment before you part with your hard-earned money. Always ask for – and carefully read – the company's prospectus and latest financial statements.
Source: SEC04/22/07 | Vonage: IPO to Bankruptcy in One Year?
04/22/07 | Foreign Markets Provide Better Diversifaction Now
03/03/07 | Finance Market Commentary, The UK Flavor
02/13/07 | 10 Tips for Value Investors
02/09/07 | Managed-Futures Funds Available To Small Investors Soon
02/06/07 | What Is Mortgage REIT?
02/01/07 | Exxon Mobile Is Minting Money
01/29/07 | The China Stock Market Is Red Hot
12/14/06 | Common Misunderstandings of Stock Market
11/28/06 | Bank of America Surpassed Citigroup in Market Cap
11/26/06 | Is Anheuser-Busch (BUD) A Buy?
11/25/06 | How To Buy QQQQ Without Commission
11/16/06 | Kraft (KFT) Spin-Off At Altria (MO) Is Near
11/04/06 | Stock Holdings By Our Congressmen
11/03/06 | What Does A Democrats' Win Mean To Your Financial Life?
11/01/06 | Warren Buffett Loves Retailing
11/01/06 | Six Banks May Receive Triple-A Credit Rating
10/31/06 | The Cash Machine at Exxon
10/31/06 | Wisdom from Value Investing Legend Christopher Browne
10/28/06 | Invest With Margin Loan? Use It At Your Own Risk
10/27/06 | Basics of Option Trading
10/26/06 | What Is Buy-And-Hold?
10/25/06 | The Difference Between Full Service and Discount Brokerage
10/25/06 | What Is P/E Ratio?
10/25/06 | Profitting From Penny Storys
10/23/06 | Go, PPD, Go!
10/22/06 | Should Microsoft (MSFT) Buy Yahoo (YHOO)?
10/22/06 | The Priceless Heart Attack
10/21/06 | Berkshire Hathaway And Its $100,000 Stock
10/20/06 | The World's Biggest IPO: Industrial & Commercial Bank of China (ICBC)
10/17/06 | Bill Gates' Successful Drug Investment
10/14/06 | Is BofA's Free Trading Program A Good Deal?
10/11/06 | What Is A Unit Investment Trust (UIT)?
10/11/06 | Visa Is Contemplating IPO
10/11/06 | Google Docs & Spreadsheets: Word and Excel From Google
10/10/06 | Will Fed Continue To Hike Interest Rates?
10/10/06 | MSN Money: 50 Best Stocks In The World
10/10/06 | Big Tobacco Companies Spending Big To Fight State Taxes (RAI, MO)
10/10/06 | Stocks With Dividend Growth Potentials (GE, MSFT, NI)
10/10/06 | Silver Linings Of Housing Industry (DHI, PHM, CTX, LEN, KBH, MDC, MTH)
10/09/06 | Berkshire Hathaway (BRK) Adds Its USG Corporation (USG) Stake
10/09/06 | China's ICBC On Track To Complete The Largest IPO, Ever
10/08/06 | How To Select Your Broker?
10/08/06 | What Is Day Trading?
10/08/06 | How To Get Corporate Reports?
10/08/06 | Major Advantages Of Options Trading
10/08/06 | Basics of Stock Option Trading
10/08/06 | What Is A Stock Split?
10/08/06 | What Is A Reverse Split?
10/08/06 | What Happens To A Company After Bankruptcy?
10/08/06 | Hedge Short Selling Losses By Call Options
10/08/06 | 40,000 Starbucks (SBUX) Stores?
10/06/06 | Google (GOOG) To Acquire YouTube?
10/06/06 | How Mid-Term Election Will Affect Drug Companies
10/06/06 | Berkshire Hathaway (BRK) Breaks $100,000
10/04/06 | Is Qualcomm (QCOM) A Buy?
10/03/06 | Stocks For The Long Run: General Electric (GE)
10/03/06 | Stocks For The Long Run: FPL Group (FPL)
10/03/06 | Stocks For The Long Run: Anadarko Petroleum (APC)
10/03/06 | Stocks For The Long Run: J.P. Morgan Chase (JPM)
10/03/06 | Stocks For The Long Run: Burlington Northern (BNI)
10/03/06 | Stocks For The Long Run: Procter & Gamble (PG)
10/03/06 | Stocks For The Long Run: Applied Materials (AMAT)
10/03/06 | How To Make A Fortune In The Stock Market?
10/03/06 | Stock 101: Market Order, Limit Order And Stop Order
10/03/06 | What Is Dow Worth Today?
10/03/06 | First Data Spins Off Western Union
10/03/06 | The Motley Fool To Measure Stock Pickers
09/30/06 | Bank of America: Interest Rate Play
09/27/06 | Investment Managers Thinks U.S. Stock Markets Undervalued
09/26/06 | Microsoft To Broadcast Concerts Online
09/25/06 | Judge Certifies Class-Action Lawsuit of "Light Cigarette" Smokers
09/19/06 | How To Pick A Stock Broker?
09/19/06 | Fortune 40: The Best Stocks To Buy Now
09/19/06 | How To Buy Stocks?
09/19/06 | Bottom-Fishing For Energy Stocks?
09/19/06 | Fantasy Investing: The Ugly Reality
09/15/06 | The Long Case for Pre-Paid Legal Services
09/14/06 | Full-Service Broker Or Discount Broker
09/12/06 | 14 Stocks for Retirement
09/11/06 | Just Purchased: ConocoPhillips (COP) @ $58.50