The Securities and Exchange Commission (SEC) of US and the Financial Industry Regulatory Authority (FINRA) have issued a warning to investors about a sharp increase in e-mail linked to ‘pump-and-dump’ stock schemes.
The regulators said a latest threat report from McAfee confirmed a steep rise in spam e-mail linked to bogus ‘pump-and-dump’ stock schemes designed to trick unsuspecting investors.
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The investor alert entitled ‘Inbox Alert – Don’t Trade on Pump-And-Dump Stock E-mails’ noted that many of these emails tout a company’s stock–typically small, microcap companies–through false and misleading statements to the marketplace.
But those sending the emails are often paid promoters or company insiders who stand to gain by selling their shares after the stock price is ‘pumped’ up by the buying frenzy created in the wake of the mass email push, the alert added.
"Investors should always be wary of unsolicited investment offers in the form of an e-mail from a stranger," said Lori Schock, director of the SEC’s Office of Investor Education and Advocacy. "The best response to investment spam is to hit delete."
These false claims could also be made on social media such as Facebook and Twitter as well as on bulletin boards and chat room pages, the regulators warned.
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By GlobalDataThe SEC recently halted trading of as many as 61 microcap stocks to prevent pump and dump frauds. Regulators have ramped up their efforts to crack down on investing fraud by mostly microcap companies.
