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Company Filings | More Search Options

#              Investor Publications                             

# Fake Seals and Phony Numbers: How Fraudsters Try to Look Legit

                            Dec. 2, 2009                       

It's a hard, cold fact: fraudsters lie. That's how they attempt to make money. They lie when they promise you "guaranteed" high returns with little or no risk. And they lie when they forget to mention that the company or product they're touting doesn't exist.

Some fraudsters tell straightforward lies, fabricating facts or making bogus claims. That's why we encourage investors to do their own independent research and to remember that wonderful, timeless adage: "If it sounds too good to be true, it probably is." Other fraudsters salt their stories with grains of truth to give their schemes an air of legitimacy. For many years, the SEC and securities regulators around the globe have been encouraging investors to investigate before they invest — to ask tough questions about their investments and the people who sell them. Taking their cue from us, some fraudsters now pretend to do the same.

One ruse fraudsters use involves assurances that an investment has been registered with the appropriate agency. The fraudsters will purport to give you the agency's telephone number and invite you to verify for yourself the "authenticity" of their claims. But even if the agency does exist, the contact information almost certainly will be false. Instead of speaking with an actual government official, you'll reach the fraudsters or their colleagues — who will give the company, the promoter, or the transaction high marks.

Another trick involves the misuse of a regulator's seal. The fraudsters copy the official seal or logo from the regulator's website — or create a bogus seal for a fictitious entity — and then use that seal on documents or web pages to make the deal look legitimate. You should be aware that the SEC — like other state and federal regulators in the U.S. and around the world — does not allow private entities to use its seal. Moreover, the SEC does not "approve" or "endorse" any particular securities, issuers, products, services, professional credentials, firms, or individuals.

Here's how you can protect yourself against these and other deceptive tactics:

If you want to invest wisely and steer clear of frauds, you must get the facts. Never, ever, make an investment based solely on a promoter's promises or what you see on the Internet — especially if the investment involves a small, thinly-traded company that isn't well known. And don't even think about investing on your own in small companies that don't file regular reports with the SEC, unless you are willing to investigate each company thoroughly and to check the truth of every statement about the company. For more information on investing wisely, visit the Investor Information section of our website.

 

 

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