NASD Issues Alert Warning Investors Of Stock Fraud After Katrina

NASD issued an Investor Alert today warning investors to beware of scams - typically promoted through unsolicited faxes and emails - promising huge financial gains in the wake of Hurricane Katrina.

NASD's Investor Alert, Beware of Stock Fraud in the Wake of Hurricane Katrina,explains how investors can spot and protect themselves from investment scams associated with the clean-up or rebuilding of the devastated areas and those that purport to take advantage of refinery issues and the rising cost of oil and gas. One example includes a fax claiming that Katrina would mean a "massive run up" in the company's stock "as demand to repair homes skyrockets." Citing the enormous cleanup costs associated with the hurricane, the fax stated, "So, you can see, any company that gets a tiny slice—even one percent—of this business could add a minimum of $260 million to its bottom line." The fax went on to urge investors to act quickly because the stock was undervalued.

"All too often, after disasters like Katrina, scam artists exploit investment opportunities to defraud investors," said NASD Vice Chairman Mary L. Schapiro. "The best way for investors to avoid these potential scams is to rely on more than unsolicited information when making investment decisions."

NASD's Alert exposes these scams and teaches investors how to protect themselves. The Investor Alert recommends investors take the time to investigate before investing. Investors are warned not to rely solely on the information in a fax or e-mail because these messages often come from corporate insiders who are paid to promote the stock. The Alert also suggests investors find out where the stock trades, since most unsolicited fax and spam recommendations involve stocks that can't meet the listing requirements of The Nasdaq Stock Market, the New York Stock Exchange, or other U.S. stock exchanges. Instead, they are quoted on markets like the Pink Sheets, where there are no minimum quantitative standards that must be met by a company.

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.