An investor alert issued Tuesday by the National Association of Securities Dealers warns investors about a new version of a “pump-and-dump” scheme, in which stocks are hyped through cellphone text messaging.
The alert describes “pump and dump” schemes in which individuals recommend a company’s stock through false and misleading statements. Misled investors then buy the stock, often causing its price to soar. Fraudsters then sell their shares off, leaving investors with worthless stock.
While the text messages are generally brief, they frequently include price targets or predictions of a tremendous run up in price, such as “200% Profit TODAY!” and pressure to invest immediately.
”The emergence of text messaging offers fraudsters another cheap and easy way to reach large numbers of potential investors,” said NASD vice president, investor education John Gannon. “Now, more than ever, investors need to be vigilant about doing their homework before investing and taking the necessary steps to reduce the likelihood of falling prey to these scams.”
The alert also advises investors to forward these sorts of messages to the NASD, which is the primary private-sector regulator of the U.S. securities industry.
Warning over new “pump and dump” scheme
Text messages being used to hype stocks, warns NASD
- By: James Langton
- December 13, 2005 December 13, 2005
- 12:45