By: Ryan Corbin, Fall 2014 Student Intern
Watch out if someone tries to sell you stock in companies trying to stop the spread of Ebola or other viral diseases! The Financial Industry Regulatory Authority has issued an investor alert warning against buying stock in companies claiming to be involved in disease prevention. In 2014 we have seen the largest Ebola outbreak in history and, in the United States, we are just beginning to see the spread of a severe respiratory illness.
Hoping to capitalize on the attention that diseases such as these are garnering, fraudsters are employing the familiar pump and dump scam. The fraudsters tout stocks in companies that claim to protect against the spread of harmful diseases. Through promoting the stock, demand is created and, thereby, the share price spikes. Once the share price spikes the fraudsters sell their shares for a profit. This leaves all the rest of us with worthless stock. Even though these dangerous diseases are on all our minds, do not let their prevalence cloud your investing judgment.
“Stocks of small companies in weak financial condition are often pump-and-dump targets” states FINRA. FINRA also warns that “aggressive stock promotional tactics may signal a potentially fraudulent scheme.” Click here for seven tips to avoid potential stock scams and to read the complete FINRA alert. If you suspect that you or someone you know has been a victim of a scam, you should send a tip or file a complaint with FINRA.