Securities regulators have issued a warning to investors about so-called high-yield investment programs.

The North American Securities Administrators Association (NASAA) Thursday published a new investor alert about high-yield investment programs (HYIPs), which it says are effectively “Ponzi schemes sold by unlicensed individuals”.

According to the advisory, these sorts of schemes generally promise very high returns, with little or no risk; and, they also often pay referral fees to current investors for bringing in new investors. “In this way, HYIPs blend elements of both Ponzi and traditional pyramid schemes into one scheme that can spread faster than ever before,” said William Beatty, president of NASAA and Washington Securities Director.

“In the past, con artists relied on word of mouth to lure investors into these investments. Now they rely on the Internet and social media buzz to quickly popularize their schemes before the fraud is discovered,” Beatty added.

The advisory includes tips to help investors recognize and protect themselves from these sorts of scams. It also encourages investors to contact their state or provincial securities regulator before investing.