Compliance
Going Green Can be Investment Scam, FINRA Warns
The Financial Industry Regulatory Authority (FINRA) is telling investors to watch out for green energy investment scams.
Reported by Ellie Behling
The alert also explains how green energy scams typically work. In some schemes, con artists are using everything from tweets and text messages to Webinars and faxes to lure investors with very aggressive, optimistic, and potentially false and misleading statements that create unwarranted demand for shares of a small, thinly traded company, FINRA said. That is a classic “pump and dump” fraud in which con artists behind the scheme then sell off their shares, leaving investors with worthless stock.
FINRA gave the examples of a solar stock touting 200% gains. In another instance, a fraudster suggested stock in a company involved with green patents could rise 1,000% or more.
Green investing can also be tied to Ponzi schemes, in which a scammer uses incoming funds from new investors to pay purported returns to earlier stage investors.
FINRA said that investors should ignore unsolicited investment recommendations and question the source of investment information. Furthermore, they should be wary of investments providing exponential returns. Another red flag is investment initiative that pushes investors to go all in, such as encouraging them to liquidate retirement accounts.
“Right now there are a lot of legitimate stories in the news about green energy initiatives, and con artists want to leverage people’s interest in green energy to make a quick buck at investors’ expense,” said John Gannon, FINRA senior vice President for Investor Education, in a statement. “There is a lot of interest in companies that claim to provide green energy, but we issued this Alert to remind investors to be vigilant about avoiding investment scams, no matter how they are packaged.”