The Securities and Exchange Commission’s Office of Investor Education and Advocacy on Thursday issued an Investor Bulletin to provide seniors who use social media with safety tips to help them avoid investment fraud.
Web-based platforms that allow interactive communication, such as Facebook, YouTube, Twitter, LinkedIn, bulletin boards, and chat rooms have become an important investing tool, the SEC said. “While social media can provide many benefits, it also presents opportunities for fraudsters targeting older Americans.” Seniors, the SEC said, need to proceed with caution when using social media as part of their investment process.
The SEC released the following six tips to help seniors avoid securities fraud:
1. Look out for “Red Flags”
Wherever you come across a recommendation for an investment on the Internet, the following “red flags” should cause you to use caution in making an investment decision:
- It sounds too good to be true. Any investment that sounds too good to be true probably is. Be extremely wary of claims on the Internet that an investment will make “INCREDIBLE GAINS” or is a “BREAKOUT STOCK PICK.” Claims like these are hallmarks of extreme risk or outright fraud.
- The promise of “guaranteed” returns with little or no risk. Every investment entails some level of risk, which is reflected in the rate of return you can expect to receive. Most fraudsters spend a lot of time trying to convince investors that extremely high returns are “guaranteed” or that the investment “can’t miss.” Don’t believe it.
- Offers to invest outside the United States. You should carefully examine any unsolicited offer to invest outside of the United States. Many fraudsters set up operations outside the United States to make it more difficult for regulators to stop their fraudulent activity and recover their victims’ money.
- Pressure to buy RIGHT NOW. Don’t be pressured or rushed into buying an investment before you have a chance to think about – and investigate – the “opportunity.” Be especially skeptical of investments that are pitched as “once-in-a-lifetime” opportunities.
2. Be Wary of Unsolicited Offers
Investment fraud criminals look for victims, including seniors, on the Internet. If you see a new post on your wall, a tweet mentioning you, a direct message, an email, or any other unsolicited – meaning you didn’t ask for it and don’t know the sender – communication regarding a so-called investment opportunity, you should exercise extreme caution. An unsolicited sales pitch may be part of a fraudulent investment scheme
3. Look Out for “Affinity Fraud”
An investment pitch made through an online group of which you are a member, or on a chat room or bulletin board catering to an interest you have, may be an affinity fraud. Affinity fraud refers to investment scams that prey upon members of identifiable groups, often seniors, religious or ethnic communities, professional groups, or combinations of those groups.
Even if you know the person making the investment offer, be sure to check out everything – no matter how trustworthy the person seems who brings the investment to your attention. Remember, the person making you the offer may not know that the investment is a scam.
4. Be Thoughtful About Privacy and Security Settings
Seniors who use social media as a tool for investing should be mindful of the various features on these websites that can help protect privacy. Understand that unless you guard personal information, it may be available not only to your friends, but for anyone with access to the Internet – including fraudsters.