From the Regulators

NASAA releases its annual list of financial products and practices that imperil unwary investors

By James Langton |

Possible crowdfunding scams top the list of new investor threats worrying regulators, says the North American Securities Administrators Association (NASAA).

NASAA released its annual list of financial products and practices that imperil unwary investors Tuesday, and put possible crowdfunding schemes to the top of its list of new threats. The group of state and provincial securities authorities says that while the list includes many long-standing concerns, it also features practices that attempt to exploit new laws designed to promote job creation and stimulate economic recovery.

According to Jack Herstein, president of NASAA and assistant director of the Nebraska Department of Banking & Finance, Bureau of Securities, NASAA members are particularly concerned about two provisions of recently passed legislation, known as the JOBS Act, that could unwittingly open a floodgate of fraud; including, provisions to expand crowdfunding (which allows firms to raise small amounts of money with minimal disclosure), and to allow the general solicitation and advertising of private placements.

The list of the top 10 financial threats, which was compiled by the securities regulators in NASAA's enforcement section, includes new threats, such as crowdfunding; inappropriate advice from investment advisers, which are under increased scrutiny since the Madoff fraud was uncovered; investment-for-visa schemes; and, scam artists using self-directed retirement accounts to mask fraud.

These emerging threats sit alongside long-standing concerns, such as dodggy precious metals investments; risky energy drilling programs; promissory notes; real estate investment schemes; private offerings; and unlicensed salesmen (particularly insurance agents) recommending that investors liquidate their securities to fund unsuitable annuity purchases.

"Investors should insist on working only with licensed brokers and investment advisers in dealing with both traditional and alternative securities investments, and should quickly report any suspicion of investment fraud to their state or provincial securities regulator," Herstein said.