FINRA to Investors: Beware of "Regulator" Impostor Scams

Tuesday, February 27, 2018

The Financial Industry Regulatory Authority (FINRA) recently issued an Investor Alert, warning investors to beware of financial scammers posing as regulators.

Gerri Walsh, FINRA’s Senior Vice President for Investor Education warns, “Financial fraudsters go to great lengths to appear legitimate, making it difficult for investors to recognize their ruses.” “That’s why we are telling investors flat out that FINRA does not guarantee investments, and our officers play no role in facilitating investment opportunities. We want people to know that and to understand how they can verify who the real FINRA is.” 

Financial fraudsters have gone so far in recent times as to use FINRA’s name and logo in correspondence—and a fake signature from FINRA President and Chief Executive Officer Robert W. Cook—to create the impression that FINRA provided guarantees related to an investment opportunity that was, in fact, an advance-fee scam. 

One common fraudulent scheme involves luring investors into sending money to cover administrative or regulatory charges associated with a buyback of shares of stock that are generally worthless or underperforming. Once investors send the money, they never see it—or any money promised from the stock buyback—again. Sometimes, the con artists will ask for additional money or simply disappear. 

On other occasions, fraudsters send e-mails to unsuspecting individuals, purporting to originate from FINRA’s CEO, notifying potential victims that “approval has been granted for the release and payment of your outstanding inheritance fund.” The victim would be asked to fly to another country—outside of the jurisdiction of any U.S. regulator or law enforcement officer—to claim the “inheritance.” The victim is asked to provide personal information, including a copy of their passport—a common tactic used in phishing scams. 

To avoid losing money in these types of scams, FINRA advises investors to hang up on suspected fraudulent callers and delete e-mails from these individuals. Walsh adds, “If you’re unsure whether an investment solicitation is legitimate, do your own independent search for the official number for the government agency, office, or employee, and call to confirm its authenticity.” 

If an investor is suspicious about an offer or thinks the claims might be exaggerated or misleading, FINRA offers a Scam Meter tool to help investors assess whether an opportunity is too good to be true. FINRA also developed a Risk Meter, which determines if an investor shares characteristics and behavior traits that have been shown to make some individuals particularly vulnerable to investment fraud.

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