Securities regulators have issued an advisory warning investors to be wary of crowdfunding investments.

The North American Securities Administrators Association (NASAA) published the warning Tuesday, in anticipation of crowdfunding investments that will be developed in the wake of new U.S. legislation permitting small businesses to raise money this way with limited regulatory oversight.

The U.S. Congress passed legislation last month known as the Jumpstart Our Business Startups (JOBS) Act, giving the U.S. Securities and Exchange Commission 270 days to adopt rules implementing a new exemption to allow crowdfunding.

“Before the SEC rules are adopted, investors should beware of promoters who jump the gun by offering investments through crowdfunding now,” said Jack Herstein, NASAA president and assistant director of the Nebraska Department of Banking & Finance Bureau of Securities.

NASAA opposed the JOBS Act primarily because of the crowdfunding exemption, which prevents state securities regulators from having any role in reviewing these sorts of investments. It is concerned that shady promoters will use the exemption to fleece investors. “We hope to limit the damage by raising awareness among investors of the potential pitfalls of investing through crowdfunding,” he said.

In the advisory, NASAA warns that crowdfunding portals claiming an accreditation may not be legitimate; that issuers using funding portals may have track records that are unproven, unsubstantiated or outright fraudulent; disclosure will be limited; investors may have limited legal ability to take action against an issuer; and the investments will be mostly illiquid.

Herstein stressed that investors “must be extremely cautious about crowdfunding investments,”, as the, “potential for fraud is significant.”

“Once exempt, crowdfunding investments will not be reviewed by regulators before they are offered to the public, nor will they be required to provide the same level of disclosures to investors or regulators required of securities offerings. Investors will need to prepare themselves to be bombarded with all manner of offerings and sales pitches,” he added.

Additionally, Herstein announced that NASAA has created a new task force to focus on Internet fraud, the Internet Fraud Investigations Project Group, which will monitor crowdfunding and other Internet offerings.