Skip to main content

Guide to Identifying and Avoiding Securities Fraud

Nov. 12, 2009

Guide to Identifying and Avoiding Securities Fraud: Online Publications at the SEC

Office of Investor Education and Advocacy

Investors-Educate Yourself

How to Avoid Fraud. Prepare and protect yourself: This publication will help you to recognize the tell-tale signs of fraud and provides tips for avoiding investment scams.

Information Matters. This publication describes information you should review before you invest, provides tips on how to find information about companies, and lists several "red flags" to avoid.

Fake Seals and Phony Numbers: How Fraudsters Try to Look Legit. Some fraudsters mix truth with fiction to make their lies more believable. Learn how to protect yourself against deceptive tactics with this publication.

Mini-Tender Offers: Tips for Investors. Mini-Tender offers typically do not provide the same disclosure and procedural protections that larger traditional offers provide. These offers-for less than five percent of a company's stock-have been increasingly used to catch investors off guard.

Microcap Stock: A Guide for Investors. Information about "microcap stocks"-low priced stocks issued by the smallest companies-may be difficult to find. When reliable information is scarce, fraudsters can easily spread false information about microcap companies, making profits while creating losses for unsuspecting investors.

Stock Market Fraud "Survivor" Checklist. This publication lists the steps for you to follow to avoid stock market fraud.

Take a Look at Financial Statements

"Pro Forma" Financial Information: Tips for Investors. It is important for investors to know that "pro forma" information is not prepared in accordance with the standards applied to financial statements filed with the SEC. In addition, following passage of the Sarbanes-Oxley Act of 2002, the SEC adopted additional disclosure requirements for public companies releasing "pro forma" financial data.

View More Materials on Financial Statements

Check Out Your Broker or Adviser

Analyzing Analyst Recommendations. This publication will help you evaluate research reports and recommendations that analyst prepare. As a general matter, investors should not rely solely on an analyst's recommendation when deciding whether to buy, hold, or sell a stock.

Cold Calling. Your Broker must follow the rules stated in this brochure when he or she makes an unsolicited call to your home. You will also find information indicating your legal rights, how to deal with colds calls, how to stop them, and how to evaluate any investment opportunity that comes your way over the telephone.

Protect Your Money: Check Out Brokers and Advisers. Before you invest, make sure your brokers, investment advisers, and investment advisers' representatives are licensed to sell securities. This brochure details how you can determine the validity of your broker's credentials, whether your broker has had any problems, and more.

View More Materials on Brokers

View More Materials on Advisers

Watch Out For Scams and Schemes

Affinity Fraud: How to Avoid Investment Scams That Target Groups. Learn how to identify and avoid investment scams that prey upon members of identifiable groups, such as religious or ethnic communities, the elderly, or professional groups.

Broken Promises: Promissory Note Fraud. While promissory notes can be legitimate investments, those that are marketed broadly to individual investors often turn out to be scams.

The Fleecing of Foreign Investors: Avoid Getting Burned by "Hot" U.S. Stocks. An increasing number of "reload" and "advance fee" scams target non-U.S. investors who lost money buying low-priced, thinly traded over-the-counter stocks and who seek to recover their losses. This brochure describes how some of these scams work, provides tips on how to avoid them, and tells you where to find help.

Pump&Dump.con: Tips for Avoiding Stock Scams on the Internet. Take time to learn about one of the most common Internet frauds: which is the classic "pump and dump" scheme.

Internet Fraud: How to Avoid Internet Investment Scams. This publication will tell you how to spot different types of Internet fraud, what the SEC is doing to fight Internet investment scams, and how to use the Internet to invest wisely.

"Wrong Numbers" and Stock Tips on Your Answering Machine. 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 do not know. This publication offers guidance on what to do if you receive that anonymous tip on your telephone answering machine.

Help and How to File a Complaint at the SEC

SEC Center for Complaints and Enforcement Tips. Report suspicious activity, file a complaint about a financial professional or an investment product, or ask questions. The division of Enforcement and The Office of Investor Education and Advocacy created the SEC complaint center to address your concerns.

The SEC's Office of Investor Education and Advocacy. Our office acts as your gateway to the SEC. We cannot tell you what investments to make, but we can tell you how to invest wisely and protect your hard earned investment dollars from securities fraud and abuse. If you have suffered wrongdoing at the hands of a bad broker or investment adviser, we want to hear from you.

Need a question answered? Send us your comments and/or suggestions.

Complaint Form

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.

Return to Top