The National Association of Securities Dealers Inc. has issued an investor alert cautioning investors of investment scams that cropped up around the recent anthrax scares and other terrorist-related events.
Recommendations for stocks of companies that make defense, anti-terrorism, or biological detection products have increased in the past few weeks. Although some of these claims may be true offers, the NASD says many could turn out to be fraudulent hoaxes designed to inflate the price of the stocks.
Recently, Nasdaq and the Securities and Exchange Commission have halted trading of companies because of questions regarding the accuracy of the companies’ claims.
The alert, “Fears of Anthrax and Terrorism Spawning Investment Scams,” explains how to spot possible investment scams, and how to avoid being drawn into a potential hoax.
The NASD advises investors to be mindful of:
- companies claiming to possesses products, “newly developed” technologies or services that will aid the U.S. anti-terrorism efforts or protect consumers from biological threats, such as anthrax;
- patriotic claims or appeals;
- mention of contracts or affiliations with federal government agencies;
- comparisons to well-know companies operating in the defense, security or pharmaceutical industries;
- standard corporate developments, like contracting with a supplier, presented as major events;
- terms, such as anthrax, anti-terrorism, World Trade Center attacks, to increase the impact of the message; and
- price targets or predictions of exponential growth in a short period of time.