Fears of Anthrax and Terrorism Spawning Investment Scams

It may not be possible to predict when the next terrorist attacks will take place. What you can count on is that, when it happens, scammers will try to take advantage of the situation. The tips below will help you protect yourself at any time.

 

Have you received faxes, spam, or junk email urgently recommending that you invest in stocks of companies that make defense, anti-terrorism, or biological detection products? If you have, you may be the target of an investment scam. We've received dozens of these faxes and emails in the past few weeks. While some of these claims that are being made may be true, many could turn out be bogus—or even scams. The SEC already suspended trading in the stock of one company that issued a press release claiming it is testing and preparing to distribute a disinfectant for anthrax. This Investor Alert explains how to spot and protect yourself from these investment scams.

 

Spotting Potential Investment Scams

 

Unsolicited faxes and spam about investments that exploit the recent anthrax scare and terrorist attacks frequently include:

  • Claims that they possess products or services that will aid the U.S. anti-terrorism efforts or protect consumers from biological threats, such as anthrax.
     
  • Patriotic claims or appeals.
     
  • Mention of contracts or affiliations with federal government agencies.
     
  • Comparisons to well-known companies operating in the defense, security, or pharmaceutical industries.
     
  • Standard corporate developments, like contracting with a supplier, presented as major events.
     
  • Popular terms, such as anthrax, anti-terrorism, World Trade Center attacks, to increase the impact of the message.
     
  • Price targets or predictions of exponential growth in a short period of time.
     
  • Urgency, such as "You must act now!!"

How to Avoid Getting Scammed

 

To avoid potential scams, make sure you get the information you need to make a wise investment choice.

  • Investigate before you invest. Never rely solely on information you receive in an unsolicited fax or email. It's easy for companies or their promoters to make glorified claims about new products, lucrative contracts, or the company's revenue, profits, or future stock price.
     
  • Find out who sent the message. Many companies and individuals that tout stock are corporate insiders or are paid to promote the stock. Look for statements that indicate cash payments or the receipt of stock for disseminating a report on the company.
     
  • Find out where the stock trades. Most unsolicited fax and spam recommendations involve stocks that can't meet the listing requirements of The Nasdaq Stock Market, the New York Stock Exchange, or other US stock exchanges. Instead, these stocks are usually quoted on the OTC Bulletin Board (OTCBB) or in the Pink Sheets. There are important differences between the OTCBB and the Pink Sheets and the NYSE, NASDAQ and other stock exchanges:
    • There are no minimum quantitative standards that must be met by a company to have its securities quoted on the OTCBB or in the Pink Sheets.
       
    • Many of the securities quoted on the OTCBB or in the Pink Sheets are infrequently traded and can move up or down in price quickly. This may make it difficult to sell your security at a later date.  
  • Read a company's SEC filings. Most public companies file reports with the SEC. Check the SEC's EDGAR database to find out whether the company files with the SEC. Read the reports and verify any information you have heard about the company. But remember the fact that a company has registered its securities or has filed reports with the SEC doesn't mean that the company will be a good investment.

If you're suspicious about an offer or if you think the claims might be exaggerated or misleading, you may want to contact us.

 

Other Alerts Related to Anthrax Exposure and the September 11th Attacks

  • We issued a telemarketing fraud alert that warns the public about possible scams to take advantage of Americans' urge to contribute to September 11th relief efforts.
     
  • The Federal Trade Commission issued a consumer alert about numerous Web sites selling Ciprofloxacin (Cipro) and other products that claim to protect you from biological threats.

Additional Resources

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Last Updated: 11/15/2001