"Wrong Numbers" and Stock Tips on Your Answering Machine

"Wrong Numbers" and Stock Tips on Your Answering Machine

You come home after a long, honest day's work, stroll by your message machine, and see the light blinking. Did a loved one call with good news? Is there a friend calling to find out what you're doing tomorrow? Some people are finding that they have instead received a "misdialed" call from a stranger, leaving a "hot" investment tip for a friend. The message is designed to sound as if the speaker didn't realize that he or she was leaving the hot tip on the wrong machine. Maybe the message sounds like this:

"Hey Tracy, it's Debbie.  I couldn't find your old number and Tammy says this is the new one.  I hope it's the right one.  Anyway, remember that hot stock exchange guy that I'm dating?  He gave my father that stock tip on the company that went from under a buck to like three bucks in two weeks and you were mad I didn't call you?  Well I'm calling you now!  This new company is supposed to be like the next really hot clothing thing.  And they're making some big news announcement this week.  The stock symbol is ... He says buy now.  It's at like 50 cents and it's going up to like 5 or 6 bucks this week so get as much as you can.  Call me on my cell, I'm still in Orlando.  My Dad and I are buying a bunch tomorrow and I already called Kelly and Ron too.  Anyway I miss you, give me a call.  Bye." 

If you get a message like this, it's not a wrong number at all. Instead, it is from someone who is being paid to leave these messages on a whole lot of answering machines. The people paying for this message to go out on hundreds or thousands of answering machines own some of this stock. They are hoping you can be tricked into buying some too, as they stand to gain by selling their shares if the stock price rises because gullible investors buy.  Once these fraudsters sell their shares and stop hyping the stock, the price typically falls and investors lose their money.  Fraudsters frequently use this ploy with small, thinly-traded companies because it's easier to manipulate a stock when there's little or no information available about the company.

These scams have also migrated to email and faxes. Be extremely wary of an email message that starts out like this:

Hey you!

PLEASE don't tell anyone about this email, because if the SEC finds out, I could get in big trouble for passing on this information, maybe even go to jail.

This is super important! I hope I have the right email for you. Your messages keep bouncing back because your mailbox is full, and I seem to remember this is your other account. I tried calling but you're not home .. arghh! OK here's the news ..

And look out for a fax transmission that says, "Will you please put your cell phone on.  I have been trying to get you for 2 hours.  I have a stock for you that will triple in price just like the last stock I gave you did.  I can't get you on either phone.  Either call me, or call Linda to place the new trade.  We need to buy now.  P.S. You better be good to me this Christmas.  No other Stock Broker has given you back to back wins.  Thanks, your shining star Financial Planner."

It is never a good idea to put your hard-earned money into a stock on the basis of a hot tip from somebody you don't know. There are unscrupulous individuals out there who have a financial stake in trying to drive up the price of companies that you've likely never heard of. Many fraudsters rely on Internet chat room sites or spammed investment newsletters to promote companies, but at the SEC we're beginning to hear more and more reports of the phony misdialed number and misdirected email scams.

So what should you do if you get one of these messages? Before you delete the phone message, trash the email, or rip up the fax, we would appreciate hearing details about the stock being hyped. Be sure to tell us the phone number from which the call came (if you're able to tell us), forward the email (including the header information), or send us a copy of the fax. This kind of information is invaluable as we seek to enforce the federal securities laws. You can use our on-line complaint form, at http://www.sec.gov/complaint.shtml, e-mail us at enforcement@sec.gov, send us a fax at 202-772-9295, or you can call us at 1-800-SEC-0330. We welcome your help in ferreting out fraud in securities sales.

After you send us the information, we suggest you delete the phone message or email. Then congratulate yourself for not falling victim to this kind of scam!

Here's a list of red flags that we often find in many of the frauds that we see:

  • If it sounds too good to be true, it is. Any investment opportunity that claims that there are huge guaranteed rewards, especially for acting quickly, are incredibly risky, and more likely to lead to losing some, most, or all of your money.

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  • "Guaranteed returns" aren't. Every investment carries some degree of risk, and the level of risk typically correlates with the return you can expect to receive. Low risk generally means low yields, and high yields typically involve high risk. If your money is perfectly safe, you'll most likely get a low return. High returns represent potential rewards for folks who are willing to take big risks. Most fraudsters spend a lot of time trying to convince investors that extremely high returns are "guaranteed" or "can't miss." Don't believe it.

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  • Check out the company before you invest. If you've never heard of a company, broker, or adviser, spend some time checking them out before you invest. Most public companies make electronic filings with the SEC. There are computerized databases to check out brokers and advisers. Your state securities regulator may have additional information. And by the way - if a supposedly upright firm only lists a P.O. box, you'll want to do a lot of work before sending your money!

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  • If it is that good, it will wait. Scam artists usually try to create a sense of urgency - implying that if you don't act now, you'll miss out on a fabulous opportunity. But savvy investors take time to do their homework before investing. If you're told something is a once-in-a-lifetime, too-good-to-be-true opportunity that "just can't miss," just say "no." Your wallet will thank you.

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Listen to one of the "wrong number" voicemails here.

 

For more information, please read:

Microcap Stock: A Guide for Investors

Internet Fraud: How to Avoid Internet Investment Scams

Information Matters

Fake Seals and Phony Numbers: How Fraudsters Try to Look Legit
 

We have provided this information as a service to investors.  It is neither a legal interpretation nor a statement of SEC policy.  If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law.