Could the federal government inadvertently be encouraging a new generation of scam artists?
That appears to be what’s worrying the North American Securities Administrators Association, which has released its newest annual list of top scams that threaten unsuspecting investors.
The association, which represents state securities regulators, is even more concerned about scammers this year because Congress abolished an 80-year-old law that prohibits advertising and soliciting on behalf of certain investment offerings.
With the law gone, persuasive charlatans may find it easier to dupe investors with investment schemes that should sound too good to be true.
Right at the top of the NASAA’s new list of investment threats are fraudulent private offerings, which regulators say represent the most common product or scheme that the nation’s state regulators investigate.
Private offerings, which are sometimes called private placements, are investments offered by individuals who want to sell a piece of their businesses without some or all of the regulatory requirements applicable to companies with securities listed on public stock exchanges. Investors who sink money into a venture that’s not regulated via the stock exchanges hope to eventually see a large financial return on their investments. These investments, by their very nature, are extremely risky and some of them are bogus.
According to the NASAA, here are some of the other serious threats to investors:
You may have heard of digital currency, such as Bitcoin and Peercoin, which allow people to buy goods and pay for services using this virtual money. The value of this digital cash is highly volatile, which is one reason why it’s a darling of speculators. Criminals and gamblers have also discovered digital currency. These types of currencies are largely unregulated, which is reason enough to be highly skeptical.
Using virtual money, according to the NASAA, could end up leaving an investor “virtually broke.”
While housing prices have continued to recover in many parts of the country, con-artist schemes related to real estate including buying, renovating, flipping or pooling distressed properties are still popular. In fact, real estate investments are the second most common type of fraud that state regulators investigate. In particular, regulators have witnessed problems with non-traded real estate investment trusts (REITS), pending short sales, and flimsy promises of investment funds being secured by an interest in real property when it has no equity or is highly leveraged.
A new threat on the regulators’ list is proxy-trading accounts. Investors need to be wary of individuals who claim to have trading expertise and offer to establish or manage a trading account on an investor’s behalf.