• Aggressive Stock Promotions Target Unwary Investors
• Investors Beware of Certain Stock Promotion Practices
• Pump and Dump and Stock Swap Scams
• Approach Mini-Tenders with Caution
• Scams Involving High Return Investments
• Be Alert for Boiler Room Tactics
• The Pitfalls of Ponzi Schemes
• Is it Independent Research or Paid Promotion?

In a typical scenario, a potential investor receives a telephone call, often from a stock promoter or salesperson that they do not know. Investors should be particularly wary of investment advice given by total strangers, particularly when the advice comes in a “cold call” or over the Internet. The promoter may recommend a particular stock, and note that the investment is limited to accredited investors but that this is a technical requirement, and that an exception will be made for this investor. This advice would see the investor lie about their financial situation to qualify to buy the securities.

The advice to break the law should be a further red flag for the potential investor – after all, if the promoter is recommending that one rule be broken, what assurance does the investor have that other rules will not also be broken, resulting in financial loss?

The reasoning behind this exemption is that if you meet these criteria, you can afford professional advice and can afford to take on a higher risk with your investment activities. If you do not meet the criteria, the investment likely carries more risk than you can afford.

Often, the promoter also makes statements about the stock’s likelihood to make investors rich, either because its value is destined to increase dramatically or because it is about to be listed on a stock exchange. Those statements are further violations of the Securities Act.