"The emergence of text messaging offers fraudsters another cheap and easy way to reach large numbers of potential investors," said NASD Vice President, Investor Education John Gannon. "Now, more than ever, investors need to be vigilant about doing their homework before investing and taking the necessary steps to reduce the likelihood of falling prey to these scams."
The Alert describes "pump and dump" schemes that involve an individual recommending a company's stock through false and misleading statements. Misled investors then buy the stock, often causing its price to soar. Fraudsters then sell their shares off, leaving investors with worthless stock. While the text messages are generally brief, they frequently include price targets or predictions of a tremendous run up in price, such as "200% Profit TODAY!" and pressure to invest immediately.
The best way to avoid being taken in by text message scammers is to ignore the message, the Alert explains. A cardinal rule of investing is to never rely solely on information received through an unsolicited source, be it a text message, email, fax or phone call. According to the Telephone Consumer Protection Act and applicable Federal Communications Commission rules, unless given explicit consent, generally no one may send a commercial text message to cell phones. Some ways investors can stop unwanted text messages include registering their cell phone numbers on the National Do Not Call Registry, opting out of third party offers when setting up wireless accounts and considering proprietary spam-blocking filters to protect their cell phones. In the event a text message is sent, the Alert advises investors to send the message to NASD.
For additional resources on this topic, see NASD's Investor Alert Stock Spams and Scams. To receive the latest Investor Alerts and other important investor information, sign up for Investor News.
NASD is the leading private-sector provider of financial regulatory services, dedicated to bringing integrity to the markets and confidence to investors through effective and efficient regulation and complementary compliance and technology-based services. NASD offers a broad range of tools and programs to help people better understand investing and know how to protect themselves along the way — including developing and publishing Investor Alerts, brochures and online resource guides on such critical topics as mutual fund class shares and 401(k) and college savings plans. NASD has distributed this information through its Web site, printed materials and Investor Forums.
NASD touches virtually every aspect of the securities business — from registering and educating all industry participants, to examining securities firms, enforcing both NASD rules and the federal securities laws, and administering the largest dispute resolution forum for investors and registered firms. For more information, please visit our Web site at www.nasd.com.
("Copyright 2005 National Association of Securities Dealers, Inc.")
