It doesn't matter. It just doesn't matter. You could have a brokerage account with Merrill Lynch, Morgan Stanley, or JP Morgan and only invest in their recommended securities. You could have a self-directed brokerage account at Schwab or TD Ameritrade and only buy what you personally pick. Regardless of where you invest or what you buy, chances are at some time you're going to get stuck with a dog, a piece of garbage.
If you're lucky, you'll take your losses and lick your wounds. If you're unlucky, some lowlife scam artist will contact you with the promise of making you whole - and, boy, are you going to hear some whoppers about how your losses will be transformed into cash.
From time to time, this stuff happens: Folks up to no good, achieve a lot of no-goodness. In many instances, they're going to tell you about some mysterious international investor or hedge fund that's targeted your bankrupt stock. There's some hidden asset or hush-hush deal. They need to get control of the insolvent issuer and your shares will get them to their goal. Even more fabulous, they're going to pay you every penny that you invested and then some.
The catch? Ah, yes - the catch! In some cases, you're going to have to send them funds - up front - to pay fees, charges, taxes. . . whatever, trust me, they'll come up with something. Now, being the skeptic that you are, you may ask for proof of the bona fides of this offer. The glib scamster who has you on the phone will likely compliment you on your caution - after all, he or she will soothingly tell you, you were burned once before. Tell you what, check us out on a website maintained by a leading securities regulatory organization. Of course, just because some crook sends you to what appears to be an honest-to-goodness regulator's website, doesn't mean that the website is honest, filled with goodness, or has anything to do with a real regulator.
Last month the North American Securities Adminstrators Association ("NASAA") sent a Cease-And-Desist letter to the operator of the "State Securities Commission" website: http://statesec.org. Why did NASAA go to such lengths? Well, it appears that this State Securities Commission website was displaying NASAA content - or as NASAA more forcefully alleged, the operator had "misappropriated" NASAA content and appeared to be using if for unlawful purposes. For example, the statesec.org website included slightly modified versions of recent NASAA news releases and investor alerts and falsely represented that the membership of the State Securities Commission consists of "the securities administrators in the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Canada and Mexico." Elsewhere, the site fraudulently claimed to have been "chartered by Congress to combat fraud."
In a November 9, 2011, press release, Jack Herstein, NASAA President and Assistant Director of the Nebraska Department of Banking & Finance Bureau of Securities, warned that the State Securities Commission site seem to be little more than one in a "long list of similar copycat sites designed to dupe investors." Moreover, Herstein warned that this "phantom regulator" site was similar to those warned about in a 2005 NASAA Investor Alert. Contrary to offering beleaguered investors relief, Herstein described these fake regulator sites as run by con artists.
Phantom regulator sites often have in common a purported "Claim Form" through which defrauded investors can file for recoveries - sometimes represented as through the Securities Investor Protection Act (SIPC), other times through similarly known organizations as NASAA, SEC, FBI, FINRA, etc.. The online forms frequently ask investors to provide statements that disclose confidential information, such as account numbers, social security numbers, addresses, etc. More brazen scams will even request a processing fee.
In some cases, as documented by NASAA in 2005, investors (both US and foreign) who were being solicited by scamsters offering to pay inflated prices for shares of stock (or for shares in companies that were in bankruptcy or insolvent), would be directed to a supposed bona fide regulatory organization's website to confirm the reputable status of the broker firm from which the con artists were working. Among the more fanciful but still bogus regulators referenced by the fraudsters, were the:
In a 2005 Press Release, NASAA provide a helpful five-point checklist of warning signs:
Top 5 Warnings Signs of a Phantom Regulator
To help investors determine if they are dealing with a bogus regulator, NASAA issued the following warning signs:
- You cannot find references to them on any other regulatory websites. If you can't find information about the "regulator" on the site of the International Organization of Securities Commissions, www.iosco.org, they probably are not a legitimate regulator.
- They endorse or approve any investment opportunity, stock, or company. Legitimate regulators are not in the business of promoting any deal, only enforcing securities laws and ensuring fair dealing.
- They say that paying a fee to "release restricted shares" is anything other than an attempt to steal your savings. This is a common ploy, and a recent twist on age-old advance fee schemes.
- Little or no information about the "regulator" appears in Internet search engines. Any legitimate regulator should generate hundreds of entries in any Internet search engine.
- If you talk to other regulators, and they say they have "never heard of them," you are most likely dealing with a fake regulator.
As the markets enter the last month of 2011, investors tend to consult with their brokers and accountants about year-end tax moves, including how best to handle tax losses. Knowing of these considerations, con artists often use this time of year to go into high gear with their up-front fee scams.
If you are contacted during the next few weeks with just such an opportunity to turn your stock losses into riches, slow down before you send any up-front fees to expedite this bonanza. Moreover, if you're directed to a third-party's website for assurance, make sure that there's more substance to that purported organization and its website than there was to the guaranteed profits in the worthless stock you're now stuck with.
By the way, a recent visit to http://statesec. org showed the site is shut down. Not to worry, though, I'm sure that other dubious sites have already taken its place. Let me know if you run into them.