The North American Securities Administrators Association released Monday its annual list of top investor threats and urged investors to use caution with popular and volatile unregulated investments.
“The most common telltale sign of an investment scam is an offer of guaranteed high returns with no risk. It is important for investors to understand what they are investing in and with whom they are investing,” said Melanie Senter Lubin, NASAA president and Maryland securities commissioner. “Education and information are an investor’s best defense against investment fraud.”
Lubin added during a call with reporters that “usually what we see are what I call the scam du jour. … What scam artists are so good at doing is tapping into what people are hearing in the news and spinning that into a scam,” for instance, related to COVID or market volatility. “While the topic area might change, the scam artists use what’s going on in the media.”
A perennial NASAA top scam listing, Lubin added, “is promissory notes because they seem less risky to people.”
Joseph Borg, Alabama Securities Commission Director and co-chair of NASAA’s Enforcement Section Committee added that by far, “NASAA’s securities regulators revealed that investments related to cryptocurrencies and digital assets is our top investor threat. Stories of ‘crypto millionaires’ attracted some investors to try their hand at investing in cryptocurrencies or crypto-related investments this year, and with them, many stories of those who bet big and lost big began appearing, and they will continue to appear in 2022.”
Many of the threats involve private offerings, “as federal law exempts these securities from federal registration requirements and preempts states from enforcing important investor protection laws,” Borg noted. “Unregistered private offerings generally are high-risk investments and don’t have the same investor protection requirements as investments sold through public markets.”
North American securities regulators were surveyed to identify the most problematic products, practices or schemes.
NASAA also announced guidance for investors, including steps they can take to protect themselves from fraud this year.
Read the gallery above for the trouble spots cited most often by state and provincial securities regulators, as explained by NASAA.