The U.S. Securities and Exchange Commission (SEC) has issued an investor alert warning about the threat of fraudulent schemes being carried out through investment newsletters.
The advisory from the SEC’s Office of Investor Education and Advocacy notes that while many investment newsletters are legitimate, some are used to facilitate pump-and-dump schemes, or to improperly tout stocks. They may also conceal undisclosed conflicts of interest, or make false performance claims, it warns.
The advisory cautions investors not to take comfort from the fact that a newsletter recommends trading through their own brokerage account. “Even if you do not give the newsletter publisher any money to place trades for you, the newsletter publisher may profit from your trading activity,” it says.
The advisory also sets out certain red flags that may indicate dubious newsletters, and it highlights the warning signs of investment fraud. And, it encourages investors to independently and thoroughly investigate any investment before investing.