By Patricia Uceda, Fall 2014 Graduate Research Assistant
The SEC’s Office of Investor Education and Advocacy issued an updated Investor Alert to further educate investors of fraudulent investment schemes involving social media. We’ve discussed the dangers of social media and investing before, and the SEC’s update provides additional important information. Due to the prevalent nature of the Internet in our society, U.S. investors are increasingly turning to social media for information about investing. This includes online networks such as Facebook, YouTube, Twitter, and LinkedIn, to name a few.
While social media can be useful for investors to read news, conduct research on stocks, and find background information on a broker-dealer or investment adviser, it also presents opportunities for fraudsters to implement deceptive investment schemes. Online they are able to contact a wide range of people at a relatively low cost. It is also surprisingly easy to create a website, account, or email that looks genuine and authentic, which can lure investors into a false sense of security. In addition, it is difficult to track down fraudsters who use social media because of the anonymous nature of the Internet. Therefore, it is harder to hold these fraudsters accountable. Be sure to check back tomorrow when we’ll discuss tips for preventing online investment fraud.