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David N. Kirkman
Task Force Alert Chair
Asst Attorney General
Consumer Protection
NC Department of
Justice
P.O. Box 629
Raleigh, NC 27602
919-716-6000

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North Carolina Division of Aging and Adult Services
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TO NC SENIOR CONSUMER FRAUD TASK FORCE MEMBERS

******Alert #284******

The Securities Division (NC Department of the Secretary of State) and the U.S. Securities and Exchange Commission have issued the following warning about certain seminars on stock trading:

Investor Alert: Investment Seminars – Trading Seminar Scams
The SEC’s Office of Investor Education and Advocacy is issuing this Investor Alert to warn investors of potential fraud they may encounter at investment seminars that purport to teach investors trading strategies that will allow them quickly and easily to make money trading securities. In particular, SEC staff warns that some trading seminar promoters may use misleading or untrue statements to lull investors into purchasing expensive products such as trading software or classes. Investors should be prepared to recognize and avoid some of the potential fraudulent conduct they may encounter at investment seminars that purport to teach investors how to trade securities.

Signs of Trading Seminar Fraud

Claims that trading strategies are “easy” or “simple.” Trading strategies are not “simple” or “easy.” Securities transactions occur in complex financial markets. Investors should be skeptical of anyone making those kind of claims.

Be mindful of “guaranteed” returns. Trading any type of securities carries some degree of risk, and the level of risk typically correlates with the return an investor can expect to receive. Low risk generally means low yields, and high yields typically involve higher risk. Fraud promoters often spend a lot of time trying to convince investors that extremely high returns are “guaranteed” or “can't miss.” Don't believe it. High returns represent potential rewards for investors who are willing and financially able to take big risks.

High-pressure sales tactics. Promoters sometimes use high-pressure sales tactics to get investors to buy their trading products and classes without thinking it through. They might claim there are only a few spots left or that getting in immediately will allow investors to see the greatest returns. Any reputable promoter of trading products or classes will let investors take their time to do research and will not pressure for an immediate decision. Sounds too good to be true. Generally, if a strategy for trading securities sounds too good to be true, it probably is. No strategy for trading securities is fool-proof.

Ways to Avoid Trading Seminar Fraud

Investigate before the seminar. Before attending any investment seminar on trading strategies, investors should research the people or company promoting the investment seminar as well as the trading products or classes being sold at the seminar to see if they have any history of complaints, fraud, or criminal activity. Investors can check-out speakers at seminars through the following resources:

  • For all speakers, contact the North Carolina Securities Division at (800) 688-4507 or (919) 733-3924.
  • For speakers that are broker-dealers, use FINRA’s BrokerCheck website.
  • For speakers that are an investment adviser, use the SEC’s Investment Adviser Public Disclosure website.
  • For all speakers, checking an Internet search engine.

Ask questions. Investors should always ask questions regarding purported trading strategies. Some questions should include:

  • How much will it cost to learn the trading strategy? Investors should determine what up-front and continuing costs are associated with both learning and implementing the trading strategy.
  • What are the risks of this trading strategy? Any trading strategy has risks. Any presentation regarding how to trade securities should have a balanced discussion of benefits and risks. Investors should be wary of any trading strategy that has “no” risks.

Be skeptical of claims of past trading success. Some promoters attempt to validate their trading strategies’ effectiveness by highlighting the past trading success of “former students” that have used their trading strategies. Some promoters have these “former students” appear at their investment seminars to talk about their past trading success. Fraud promoters may provide false or misleading trading records to demonstrate these past trading successes. Investors should always be mindful of any claims regarding past trading success. Past trading success is not an indication of future trading success. Furthermore, investors should independently verify whether the past trading success stories and records are accurate.

Related Information

For additional educational information on avoiding fraud, please explore the “Avoiding Fraud” section of Investor.gov. Finally, be sure to check out the article, “Is There Such a Thing as a ‘Free Lunch’?” in the November 2009 edition of the Securities Division’s newsletter.


******End of Alert******

Date: November 28, 2011

David N. Kirkman
Task Force Alerts Chair
Assistant Attorney General
Consumer Protection Division
Office of Attorney General Roy Cooper
114 West Edenton Street
9001 Mail Processing Center
Raleigh, NC 27699-9001
Tel. 919-716-6000
Fax 919-716-6050

 

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