We all get them. Spam email telling us about the latest hot stocks. Most are easy to delete and ignore, but others are well done. A company logo, links to a website. They look and sound legitimate. After all, everyone is on the internet these days, so would investment advisers be using it too?
Maybe, but the best advice would be to steer clear of unsolicited e-mails that promote specific investments. Many of these e-mails promote microcap companies, smaller companies that often have limited assets. Microcap stocks often trade on over-the-counter (OTC) markets that have fewer regulations than the major stock exchanges. These OTC markets include the United States OTC Bulletin Board (OTCBB) and the Pink Sheets.
While all investments have some risk, microcap stocks are considered high risk because many of these companies are new and have few assets or business operations. In addition, there is little public information available about them. By contrast, larger public companies that trade on recognized exchanges like the Toronto Stock Exchange (TSX) must meet minimum listing requirements. They must also file financial statements and other reports with securities regulators, which any investor can get for free on such websites as www.sedar.com.
Remember you should research all investment opportunities before investing. Be particularly careful of spam e-mail touting microcap investments, as by their nature these can be very risky investments. While no investment is without risk, up front research may reduce the risk of investors falling victim to a scam or committing to an unsuitable investment opportunity.
You do not know the motives of the person sending the e-mail, and they do not know you, your financial objectives or risk tolerance. They are not in a position to give you investment advice.
Some spam e-mails have lengthy disclaimers that are at odds with other information in the e-mail. If you read the fine print, you may find that the people sending you the e-mail are being paid to promote the investment. They also may benefit from an increase in the value of the stock they’re encouraging you to buy. They may also use fancy scientific or financial jargon to convince you that the people behind the opportunity are professional, knowledgeable and experienced. Don’t take it at face value.
Spammers urge you to act with statements like “this one is ready to explode!” and “We have a runner – opportunities like this don’t knock on the door every day.” If they are trying to manipulate the market for the stock, it’s in their interest to get you to act fast. Whatever you do, don’t reply. Even if you just reply to ask the sender to remove you from their mailing list, that tells them that they have a legitimate e-mail address and you may get more spam.
Delete the e-mail. Block further e-mail from that sender. Some web-based email systems also allow you to report the email as “junk” email. This helps to increase the effectiveness of junk mail filters, and can reduce the amount of spam you receive in the future.
If you have a question or concern about an e-mail that promotes an investment opportunity, contact the Nova Scotia Securities Commission.
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