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Scams Target Non-U.S. Investors Using Fake Regulator Websites and False Broker
It's nice to get attention—unless
you're a non-U.S. investor targeted by con artists trying to steal your money.
We are issuing this Alert
to warn non-U.S. investors that scammers are using fraud—including setting up
phony "regulator" websites and fake identities—to separate you from your
money. No regulator is immune. In fact, in a recent twist, some scammers have
misused FINRA's name and impersonated FINRA employees in email correspondence
in an apparent attempt to lend legitimacy to their schemes.
The scam generally begins
with a phone call offering to pay you an enticingly high price to buy shares
of stock you own that are virtually worthless (sometimes referred to as "non-performing").
To build legitimacy, the caller refers you to a phony website that contains
investor protection information, or poses as a legitimate securities professional
or regulator. To take the "deal," you are asked to send a fee in advance to
pay for their services. Once your money is sent, you never see it—or any of
the money from the deal—again.
Ploy and SIPC Scams
Investors in the United Kingdom have recently received calls to purchase pre-IPO
shares of Facebook. Fraudsters use an array of high-pressured sales tactics
to convince investors to send money to lock in the purchase of non-existent
shares of the social networking company. One investor was told she "must" send
money because she had verbally committed to purchase the shares over the phone—and
that her call had been recorded as evidence of the purchase.
U.S. investors are not immune to advance-fee scams. The Securities Investor
Protection Corporation (SIPC), which maintains a special reserve fund mandated
by the U.S. Congress to protect the customers of insolvent brokerage firms,
issued a warning
to consumers who are contacted by individuals falsely claiming to represent
SIPC. Scammers ask for personal information or payments in order to return funds
lost in investment scams. In some cases, those contacted have lost money to
past frauds and are asked to pay an up-front fee to recover lost funds.
Because it is very difficult
for regulators and law enforcement agencies to recover any losses from these
"advance fee" scams, your best defense is to avoid being defrauded in the first
place. This Alert describes real-life tactics of recent advance-fee scams and
offers tips on how to avoid becoming a victim, such as using FINRA's BrokerCheck
to check out the caller, as well as where to turn for legitimate help and advice.
Advance fee scams
play on investor hopes that they will be able to reverse a previous investment
mistake when they purchased a low-priced stock. Scammed investors say this is
how they lost their money in these schemes:
- The investor gets a
call out of the blue (a "cold call") from an individual offering to buy shares
of a low-priced stock at a premium to the current market value. (Con artists
use shareholder lists of defunct companies or other lists that contain names,
phone numbers and financial holdings of targets).
- The caller purports
to be a U.S. broker, regulator or "stock recovery agent" and claims to be
able to recover losses from a previous stock purchase by exchanging or swapping
an investor's near-worthless stock for a name-brand stock, or buying the stock
outright from the investor for more than the market value. The fraudsters
may steal the identity of a legitimate securities firm and provide the customer
with information such as the legitimate firm's FINRA registration number (CRD
number). Caution: The phone number may be altered or removed from this report
in the hope that you do not contact the legitimate firm. You may contact FINRA
to verify the actual phone number of a registered firm by calling (800) 289-9999.
- A bogus email from FINRA
and regulatory report is sent to the customer validating the legitimacy of
- The caller may also
refer the investor to a website of a "regulator" that can vouch for the
recovery techniques, or even endorse the caller or to another "investor" who
can vouch for the transaction.
- The caller faxes the
investor a "Stock Purchase Agreement" or other official looking form. The
form requests you send a transaction fee that may have a fancy name such as
"performance bond," "transaction tax," "share restriction removal fee," "penalty
restriction removal fee," "equity evaluation deposit," or the like.
- The form also requests
a statement of investment holdings and bank account information. And the form
often ends with a statement such as: "Processing of the above transaction
will commence upon the receipt of payment…" In other words, the investor gets
nothing until money is sent in advance.
- The caller continues
to keep in touch with the investor by phone and fax—working to win their trust—until
the advance-fee money has been sent.
- In some cases, once
the money has been sent, the investor is called back to send even more money
to assure the delivery of their stock.
Regardless of the tale,
or where the caller claims to be from, the punch line is always the same—you
must make the advance fee payment before the caller can deliver a much larger
sum of money to the investor.
Lying for Legitimacy: Real-Life Tactics
Confident talk and elaborate deceptions go hand-in-hand with these fraudulent
schemes. The key to success is to appear legitimate. Scams aimed at international
investors often prey on the investor's lack of understanding of U.S. securities
products, markets and regulations, as well as the regulatory organizations that
Here are some real-life examples of how scammers operate:
- Posing as FINRA.
We have received multiple complaints from U.K, investors associated with a
scheme to buy back worthless U.S. securities. The fraudsters claim to be with
a legitimate U.S. securities firm—but while the firm is indeed legitimate,
its identity has been stolen by the fraudsters. To build trust, the fraudsters
email a letter purportedly from FINRA that verifies that the firm is "properly
licensed by FINRA to perform transfer or stock recovery functions" in the
investor's country. Along with the letter, a copy of the firm's BrokerCheck
report (see below) is attached. The report has been altered to remove the
firm's phone number. The letter is signed by a representative of "FINRA Shareholder
Support." The name of the FINRA representative and FINRA department are both
- Fraudulent use of
FINRA BrokerCheck. We received a complaint from an international investor
whose "broker" encouraged him to check out his credentials using FINRA BrokerCheck
which contains the professional background, registration/license status and
disciplinary history of all FINRA-registered firms and registered securities
professionals. In reality, the caller was an impersonator who stole the name
of a legitimate securities professional and boldly used FINRA BrokerCheck
for fraudulent purposes. FINRA knows of more than 50 legitimate U.S. securities
firms and individual brokers whose identities have been hijacked by scammers
to create an appearance of legitimacy. Note: Unsolicited provision to a potential
investor of a firm's Central Registration Depository (CRD) number, which FINRA
assigns to each registered firm, or recommendations to "check me out on FINRA
BrokerCheck," may be tip offs to fraud. Also, be wary if the "broker" mails
you documents from BrokerCheck: They may have been altered.
- Fabricating an official
regulator. We received a complaint from an Australian investor involved
in a scheme to buy back shares of nearly worthless stock. He was told to do
his due diligence by checking with the "International Compliance Commission."
Another investor was told to visit a site run by the "Regulatory Compliance
Commission." Both organizations are phony but their websites look real
and contain plenty of investor information, which is stolen from the sites
of legitimate regulators. Note: These fake sites are often "cookied" to track
visitors and gather information. These sites may vanish at any time, or pop
up in the guise of a different fictitious entity.
- Mirrored information.
Fraudsters who employ FINRA BrokerCheck in their con will typically use much
of a legitimate firm's information. For example, the firm will use the same
address on their letterhead. If a phone number is provided, the area code
will be the same as the number listed on FINRA BrokerCheck, however, the remaining
numbers following the area code will be different. Fraudsters may use the
exact spelling of legitimate firms, or alter their names slightly. Be wary:
Slightly irregular phone numbers or names may indicate fraudulent impersonation.
- "Official" letterhead.
An Australian investor was urged by a "fraud investigator" to contact the
Anti-Fraud Task Force to verify the investigator's credentials. The investor
did so and received a letter, on official-looking letterhead, giving the organization's
seal of approval to the investigator and the method of recovery he was recommending.
It is not uncommon for scammers to claim affiliation with legitimate U.S.
regulatory organizations such as the SEC,
- False addresses and
answering machines. The website of the "International Equity Commission"
lists the address of a Greensboro, NC skateboard shop. The address of the
"Regulatory Compliance Commission" in Denver, CO is a real office building,
but the suite number is fictitious. Most phone numbers listed on scammer websites
lead to answering machines that offer no information about the identity of
- References to the
IRS and other US government agencies. An international investor received
an official-looking letter from a fake brokerage firm that stated, "The Internal
Revenue Service (IRS), by default, is also involved in monitoring each transaction
in an auditing capacity…" And, "In conjunction with the SEC and the IRS, the
Transfer Agent is further charged with ensuring compliance in respect of rules
and regulations that apply to the directors and stockholders of the corporation."
These statements are simply ploys to sound legitimate and build credibility.
The best way to avoid losing money in these scams is simply to hang up—the sooner
the better. This is easier said than done, since the callers are con artists
highly skilled at delivering their fraudulent pitches.
Regardless of how convincing a caller's pitch, you can take action to sniff
out fraud and avoid losing money:
- Source of your name.
Ask the caller how your name was obtained. If they say a shareholder list,
ask for the company that compiled the list and contact information. If they
refuse any request for information related to how they got your name, hang
- Offering a premium.
If the caller offers you more money for shares of stock than the current value
at which the stock is trading, assume you are being scammed and hang up.
- Advance fee.
If you are asked to pay a "penalty restriction fee" or fee to "release restricted
shares," or if you are asked to pay for a "performance bond" or send an "equity
evaluation deposit," assume you are being scammed and hang up.
- Firm license.
Verify that the firm is licensed to do business in the country where the firm
or broker is located. If the firm is located in the United States, use FINRA
BrokerCheck to check the status of a broker or brokerage firm. If the firm
is not listed in BrokerCheck, chances are it is fraudulent.
- BrokerCheck verification.
It's possible that the caller may be impersonating an actual broker or firm,
so as an extra precaution, use the contact information in FINRA BrokerCheck—not
information given to you by the caller—to contact the broker or firm yourself.
Ask to speak to the compliance officer of the firm to verify its identity.
Remember, slight variations of FINRA BrokerCheck information, such as the
omission of a phone number, may indicate fraudulent impersonation. When using
FINRA BrokerCheck, you will find a brokerage firm's phone number in the "Firm
Profile" section of the "Full PDF Report."
- Verify address and
phone number. Personally verify the addresses and phone numbers that may
be listed on either the firm's website or the site of any "regulator"
that you may be directed to. If you reach an answering machine, particularly
one that offers little or no information about the organization, assume you
are being scammed.
- Avoid scam websites.
Don't go to websites recommended by cold callers—they may not only provide
deceptive information, but may track your visit and get your personal information
for future scams. Remember that official U.S. government sites end in ".gov,"
but the sites of FINRA and other government-sanctioned regulators, like stock
exchanges, end in ".com" or ".org."
- Check with regulators
before sending money. Don't send any money until you have contacted the
REAL regulators in your own country. Although they will not "approve" or "endorse"
particular transactions, they are trained to spot fraud if you run the offer
- Check with banks
before sending money. Never send money to a bank you have not heard of.
Deal only with major banks, preferably with branch offices in your area. Call
the bank first to inquire about the company or individual asking you to send
- Keep your guard up.
Expect ready responses and a cool demeanor in the face of your skepticism.
These scammers lie for a living.
to the Well
Once scammers have your contact (and possibly financial) information, they will
likely try repeatedly to separate you from your money, even months or years
later or for a new scam. Scammers may attempt to solicit additional funds from
you by creating false roadblocks to the proposed transaction. These roadblocks
might be presented to you as administrative fees, such as bank transfer fees
or fees to lift unexpected stock restrictions. Be advised: If you have already
sent money to a scammer, don't send more!
to Turn for Help and Advice
If you suspect that you are being scammed or have lost money, the best place
to start is with your home country securities regulator. Don't hesitate to call
or email them at the first sign of impropriety. Use the International Organization
of Securities Commissioners (IOSCO) website to find your country's official
regulatory organizations: www.iosco.org.
Call them if you have any questions about a regulatory organization. If official
regulators have not heard of the organization, it is most likely fraudulent.
In the US, major regulators include the SEC
(FINRA.org) the exchanges and the States (see www.nasaa.org).
In addition, the University of Toledo Law School maintains a list of financial
regulators at http://law.utoledo.edu/students/financialregulators/index.htm.
Don't simply click on links in a suspected email to access these regulators;
the address in the email may look right, but may take you to a different location.
Type the regulator Web address directly in the Web browser address bar or search
Public Alert: Unregistered Soliciting Entities (PAUSE)
Public Alert: is a new resource from the Securities and Exchange Commission
to help investors avoid online and boiler room scams. PAUSE lists information
the SEC has received through complaints from investors and others—including
foreign securities regulators—about securities solicitations made by entities
that falsely claim to be registered in the U.S., use phony U.S. addresses or
provide fake endorsements from fictitious government agencies or international
A number of international
sites make a point of publicizing unlicensed cold-calling firms. The following
list of regulatory organizations comes from the SEC's Publication Worthless
Stock: How to Avoid Doubling Your Losses:
Capital Markets Supervisory Agency (BAPEPAM)
Financial Services Authority
CONSOB (click on "Warnings")
If you suspect fraud on
the part of a U.S. firm or individual, or simply want to talk through an investment
that seems a little too good to be true, call FINRA at (240) 386-4357 or file
a complaint or question using FINRA's online Investor
For additional information and recent alerts on international investor fraud
- The SEC's
Alert Investors Beware of entity Calling Itself "U.S. Securities and
- North American Securities
Administrators Association's Alert NASAA Warns Investors to Beware of Phantom
- To receive the latest
Investor Alerts and other important investor information sign up for Investor
Financial Industry Regulatory Authority (FINRA), is the largest independent
regulator for all securities firms doing business in the United States. All
told, FINRA oversees nearly 4,800 brokerage firms, about 170,400 branch
offices and approximately 643,000 registered securities representatives.
FINRA believes investor
protection begins with education. Using the Internet, the media and public forums,
we help investors build their financial knowledge and provide them with essential
tools to better understand the markets and basic principles of saving and investing.