SEC Warns That Scammers May Try to Take Advantage of California Wildfires
On November 29, 2018, the SEC’s Office of Investor Education and Advocacy issued an investor alert warning investors, including individuals who may receive lump sum payouts from insurance companies and others as a result of damage from the California wildfires, about fraudulent investment scams.
The SEC advised that fraudsters often try to use natural disasters, like the recent California wildfires, as a way to lure victims into investment scams. These scams include:
- So-called “investments” in companies purportedly involved in cleanup, repair and recovery efforts;
- False claims of affiliation with state and federal governments or large, well-known companies; and
- Sales of stock in small publicly-traded companies as part of “pump-and-dump” scams (promising high returns for investments in companies that supposedly will reap huge profits from recovery and cleanup efforts).
Some scams, according to the SEC, are circulated through unsolicited e-mail or social media, as well as by telephone. Fraudsters also may target individuals receiving money from insurance companies or other sources. The SEC warns that individuals, including those receiving lump sum insurance payouts, should be extremely wary of potential investment scams.
Investors: Use Caution, Ask Questions
The SEC advises investors that one of the best ways to avoid investment fraud is to ask questions. Investors should be suspect, if approached by somebody touting an investment opportunity. It is important for an investor to ask that individual whether he or she is licensed and whether the investment is registered with the SEC or with a state. Investors should confirm their answers with an objective source, such as the SEC’s Office of Investor Education and Advocacy or a state securities regulator. Importantly, promises of high or guaranteed profits with little or no risk are classic signs of fraud.
Investors should carefully review their entire financial situation, before making any investment decision, especially if a recipient of a lump-sum payment. The SEC reminds investors that a payment may have to help finance rebuilding and recovery as well as last one and his/her family for a long time.
The SEC’s publication, Ask Questions, discusses many of the other questions to ask anyone who wants you to make an investment.
SEC Investor Resources
- SEC Publication: Lump Sum Payouts: Questions You Should Ask Yourself Before You Invest a Dime
- SEC Investor Alert: Affinity Fraud
- Investor.gov Protect Your Investments Page
- Saving and Investing: a Roadmap to Your Financial Security through Saving and Investing. This publication is also available in Spanish.
- Ask Questions: Questions You Should Ask about Your Investments. This publication is also available in Spanish.
- California Department of Insurance Website