Arkansas Securities Department announces top five investor threats for 2022

Little Rock, Arkansas (January 11, 2022) – The Arkansas Securities Department (ASD) has announced guidance for investors, including a top five list of investor threats. The ASD encourages caution when purchasing volatile unregulated investments, especially cryptocurrency and digital assets.

 ASD Commissioner Eric P. Munson has also offered guidance for investors, which includes steps for protection against fraud in the upcoming year. 

“Cryptocurrencies have developed into more than a trillion-dollar financial market with a wide variety of uses and functionalities,” Munson said. “The Securities Department discovered that investments related to cryptocurrencies and digital assets is our top investor threat. Prospective investors are encouraged to proceed with caution, do their research, evaluate their financial goals, talk to a financial professional and call the Department for information on the company offering the investment.”

The top 2022 threats were determined by a survey of securities regulators conducted by the North American Securities Administrators Association (NASAA). The annual survey is designed to identify the most problematic products, practices or schemes facing investors.

 The following is a list of the top five investor threats to watch out for in 2022: 

• Investments tied to cryptocurrencies and digital assets,
• Fraud offerings related to promissory notes,
• Money scams offered through social media and internet investment offers,
• Investment advice tied to precious metals-based investments, and,
• Financial schemes connected to Self-Directed Individual Retirement Accounts.

“Many of the fraud threats facing investors today involve private offerings, as federal law exempts these securities from registration requirements and preempts states from enforcing important investor protection laws,” Munson added. “Unregistered private offerings generally are high-risk investments and don’t have the same investor protection requirements as those sold through public markets.” 

Investors are urged to practice the following tips to identify and avoid investment scams:

• Anyone can be anyone on the Internet. Scammers are spoofing websites and using fake social media accounts to obscure their identities. Investors should always take steps to identify phony accounts by looking closely at content, analyzing dates of inception and considering the quality of engagement. To ensure investors do not accidently deal with an imposter firm, pay careful attention to domain names and learn more about how to protect your online accounts. 
• Beware of fake client reviews. Scammers often reference or publish positive, yet bogus testimonials purportedly drafted by satisfied customers. These testimonials create the appearance the promoter is reliable – he or she has already earned significant profits in the past, and new investors can reap the same financial benefits as prior investors. In many cases, though, the reviews are drafted not by a satisfied customer but by the scammer. Learn how to protect yourself with NASAA’s Informed Investor Advisory on social media, online trading and investing. 
• If it sounds too good to be true, it probably is. Bad actors often entice new investors by promising the payment of safe, lucrative, guaranteed returns over relatively short terms – sometimes measured in hours or days instead of months or years. These representations are often a red flag for fraud, as all investments carry some degree of risk, and the potential profits are typically correlated with the degree of risk. Learn more about the warning signs of investment fraud.

The ASD recommends investors independently research registration of investment firms. They should not use hyperlinks provided by the parties and instead contact their state securities regulator, search the SEC’s Investment Adviser Public Disclosure website or FINRA’s BrokerCheck platform. Investors should be aware that scammers may misappropriate the CRD numbers of registered firms and individuals. Investors should contact their regulator if they suspect the firm is engaging in this type of tactic.

Individuals offering investments are obligated to truthfully disclose all material facts, and they must disclose the risks associated with each product. On the other hand, bad actors will often minimize or conceal risks, and use hyperbole to tout profits and payouts. Investors should pay attention to these details, as they can provide clues about the potential illegitimacy of a scam.

Bad actors may be impersonating licensed parties by using phony websites that place viruses or malicious software on victim’s computers. Investors should continue to observe best practices for cybersecurity. The FDIC has issued guidance to assist consumers in protecting themselves from cyber-attacks.

Before investing in a product, contact the Arkansas Securities Department with questions about any investment opportunity or the persons offering it for sale. Call (800) 981-4429 to report suspected fraud, inappropriate securities business practices or to obtain consumer information.

The ASD cautions citizen investors of all ages and experiences to thoroughly scrutinize and research any investment opportunity or offer.  Contact the ASD at 1-800-981-4429 or www.securities.arkansas.gov to check out any person or financial professional offering an investment opportunity or investment advice for a fee and the products they offer for proper registration.  Contact the ASD to report suspected fraud, inappropriate securities business practices, or to obtain consumer information. The ASD provides free investor education and fraud prevention materials in print and through educational presentations upon request.