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The SEC’s Office of Investor Education and Advocacy is issuing this Investor Alert to warn investors, including individuals who may receive lump sum payouts from insurance companies and others as a result of damage from the California wildfires, about fraudulent investment scams.

Fraudsters often try to use natural disasters, like the recent California wildfires, as a way to lure victims into investment scams.  These scams include:

• So-called “investments” in companies purportedly involved in cleanup, repair and recovery efforts;

• False claims of affiliation with state and federal governments or large, well-known companies; and

• Sales of stock in small publicly-traded companies as part of “pump-and-dump” scams (promising high returns for investments in companies that supposedly will reap huge profits from recovery and cleanup efforts).

Some scams are circulated through unsolicited email or social media, as well as by telephone.  Fraudsters may also target individuals receiving money from insurance companies or other sources.  Individuals, including those receiving lump sum insurance payouts, should be extremely wary of potential investment scams.

Be Skeptical and Ask Questions

One of the best ways to avoid investment fraud is to ask questions.  Be skeptical if you are approached by somebody touting an investment opportunity.  Ask that person whether he or she is licensed and whether the investment is registered with the SEC or with a state.  Check out their answers with an unbiased source such as the SEC’s Office of Investor Education and Advocacy or your state securities regulator.   Keep in mind that promises of high or guaranteed profits with little or no risk are classic signs of fraud. 

Take a close look at your entire financial situation before making any investment decision, especially if you are a recipient of a lump sum payment.  Remember, your payment may have to help finance rebuilding and recovery as well as last you and your family for a long time. 

Our short publication called Ask Questions discusses many of the other questions you should ask of anyone who wants you to make an investment.

Resources

Below is a list of some online resources that may help.  If you are thinking about investing and have any questions, do not hesitate to call the SEC’s Office of Investor Education and Advocacy at 1-800-732-0330, or ask a question using this online form.

  

The Office of Investor Education and Advocacy has provided this information as a service to investors. It is neither a legal interpretation nor a statement of SEC policy. If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law.