By: Jasmine Blake-Stewart, Spring 2015 Student Intern
Electronic cigarettes have become very popular over the past years. A recent investor alert from FINRA is the big talk among investors. New technology, specifically, electronic cigarettes, can increase investment opportunities. However, this new technology can increase fraud as well. Investors should be aware of this. FINRA is concerned that fraudsters may attempt to trick investors into fraudulent investments in this new technology.
Investors interested in this market need to be aware of what they are investing in and look beyond the hype. Investors need to recognize that there are fraudsters who are eager to make money off investors who are not aware of what is going on.
The following list contains 8 tips to avoid being scammed:
- Be skeptical about the source you are looking at: Scammers tend to exaggerate to get you to purchase something. Be sure to know who is making the claim and whether it is legitimate.
- Do your research: Know who is involved in the investment before you invest in something.
- Check for reverse merger activity: Reverse merger activity can be a potential sign of a fraudulent investment – if you find such activity, do more homework before you invest.
- Name dropping is just a way to get you to invest: Do not fall for name dropping. For example, if a company claims to be the next Apple of a new industry, beware.
- Know where the stock trades: Most stock schemes do not trade on the registered national securities exchanges, so check the registered national securities exchange to see if the company is listed.
- SEC filings are important to read about a company: Make sure the promotional information that the company provided you aligns with the information that is filed with the SEC.
- Frequent changes to a company’s name and/or business focus is something you want to be skeptical about: This is a sign that a company may be engaging in a potential fraud or scam.
- Always read the fine print: The fine print is important – read it to see if there are any disclosures or red flags that give you a reason not to invest. Investors who receive an offer that contains misleading claims such should contact FINRA immediately. In addition, to read more on electronic cigarette stock scams, and to avoid being victimized by a potential scam please read the full alert here.