Regulators are warning investors and their financial advisors about potential investment scams and high-pressure sales tactics touting high-return investments in the wake of Hurricane Florence.
Finra issued an investor alert on Wednesday explaining how investors can spot and protect themselves from investment scams associated with the cleanup or rebuilding of devastated areas.
"When a natural disaster strikes it's not uncommon for scammers to rush in," said Gerri Walsh, Finra's senior vice president of investor education. "In addition to charity frauds, we often see investment scammers try to exploit a variety of hurricane-related opportunities.”
Financial advisors should be aware that investors, particularly seniors and other vulnerable individuals, may become the targets of aggressive sales tactics and unsolicited emails, texts, phone calls, messaging apps and social media communications touting high returns, lucrative contracts, cutting-edge technology or other claims tied to prospering in the aftermath of Hurricane Florence, the regulator said
"While some of these opportunities and claims might be legitimate, many others could be scams," Walsh added.
The most frequent types of scams tout the stocks of companies that purport to be associated with cleanup and rebuilding efforts. These promotions often trumpet supposed breakthroughs in science and technology to address current and future flood-related issues, such as contamination, Finra said.
The alert describes some of the hallmarks of fraudulent pitches:
• Predictions of exponential growth;
• 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;
• Depiction of standard corporate developments 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.
“Investigate before you invest,” Finra said. “Never rely solely on information received in an unsolicited email, text message or cold call from an "analyst" or "account executive," the investor alert stated.
State securities regulators also issued a warning, cautioning investors to watch out for opportunistic investment or charitable scams in the wake of the widespread damage caused by Hurricane Florence.
“Natural disasters bring out the best and worst in people. While news stemming from Hurricane Florence has rightfully focused on the tireless efforts of first responders and neighbors helping neighbors, we know from experience that financial predators are lurking like snakes in the water to seek profit from the misfortune of others,” said Joseph P. Borg, NASAA president and director of the Alabama Securities Commission.