From the Regulators

FINRA alert warns investors to be wary of stock promotions sent through messaging apps

By James Langton |

Traditional pump-and-dump schemes are finding their way into investors' pockets through new messaging apps U.S. securities regulators are warning.

The Washington, D.C.-based Financial Industry Regulatory Authority (FINRA) issued a new investor alert on Wednesday that warns about stocks being touted through popular messaging apps such as WhatsApp.

WhatsApp users were recently flooded with text messages that appeared to originate with well-known brokerage firms, touting the stock of a microcap company claiming that the stock was "going to double in the next few days," the alert says.

This is simply a variation on the traditional pump-and-dump scheme, the alert explains, which aims to drive up the price of a stock through hype so that the perpetrators can sell into the inflated prices, except that fraudsters are now utilizing the mass message push feature in messaging apps to do the touting.

The alert warns investors to be wary of stock promotions sent through messaging apps as these messages could be coming from fraudsters looking to trick unsuspecting investors.

"Scammers keep up with the times. If you are using a messaging app and receive a tout claiming that a stock is poised for explosive growth, don't respond—just delete," said Gerri Walsh, FINRA's senior vice president for investor education.