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In this episode of the Keiser Report, Max Keiser and Stacy Herbert discuss investors picking up nickels in front of steamrollers as both stocks and bonds soar. In the second half, Max interviews Ian Fraser, author of Shredded: Inside RBS, The Bank That Broke Britain. They discuss how the bank rigged Libor (and could go bust because of the fines and the ongoing criminal investigations), mispricing assets (with a little help from compliant regulators and complicit auditors) and kneecapping companies out of spite (just because).
The SEC’s Office of Investor Education and Advocacy is issuing this Investor Alert to help investors avoid fraudulent schemes that may be carried out through investment newsletters.
Investment newsletters come in many forms. They may be found online or in hard copy; they may be available for a fee or free of charge. Some newsletters address general securities topics, such as which types of stocks, bonds, or funds might make good investments. Others may provide commentary and analysis about particular companies, investment products, or financial trends.
While many investment newsletters are legitimate, some are used to carry out schemes designed to deceive investors. Such schemes can include:
Touting – promoting a stock without properly disclosing compensation received for promoting the stock.
"Pump and dump"schemes– pumping up a company’s stock price by making false and misleading statements to create a buying frenzy, and then selling shares at the pumped up price.
Scalping – recommending a stock to drive up the stock price and then selling shares of the stock at inflated prices to generate profits.
Undisclosed conflicts of interest – falsely claiming to provide independent analysis or failing to explain conflicts of interest (or biases), including financial incentives, that may influence the investment recommendations.
False performance claims – misrepresenting the track record of the newsletter’s investment recommendations.
Some investment newsletters claim to be sources of unbiased information, when in fact the newsletter publisher will make a lot of money if the newsletter convinces investors to buy or sell particular stocks. Do not take comfort because a newsletter encourages you to purchase or sell a stock through your own brokerage account. Even if you do not give the newsletter publisher any money to place trades for you, the newsletter publisher may profit from your trading activity. For example, you may purchase a stock (causing the stock price to rise) and then the newsletter publisher may sell its shares of that stock (profiting at your expense).
If a newsletter promotes a particular stock, read carefully what the newsletter says about compensation it receives and look for these red flags:
No disclosures. Be suspicious if the newsletter does not disclose having received any compensation.
Vague disclosures. Be skeptical of newsletters that do not specifically disclose who paid them, the amount, and the type of payment. The following examples raise red flags because they do not contain specific information:
"From time to time, the Newsletter may receive compensation from companies we write about."
"From time to time, the Newsletter or its officers, directors, or staff may hold stock in some of the companies we write about."
"The Newsletter receives fees from the companies we write about."
Buried disclosures. Be wary if the newsletter’s disclosures are difficult to find or appear in tiny, hard-to-read print.
Questions about your stock purchases. Be careful if a newsletter representative asks you detailed questions about your stock purchases like how many shares you bought, when you purchased the shares, or which broker you used to buy the shares. The newsletter publisher may make money based on the amount of shares its subscribers buy.
Even if a newsletter makes specific disclosures about being compensated for promoting a stock, be aware that fraudsters may include such disclosures to create the false appearance that the newsletter is legitimate.
Fraudsters may also use newsletters as a way to get their foot in the door to pitch fraudulent investments by phone. Be careful if someone tries to get you to subscribe to a newsletter and then calls you with specific investment recommendations.
When considering any potential investment, watch out for these warning signs of investment fraud:
Promises of high investment returns. Be highly suspicious if the promoter guarantees you a high rate of return on your investment.
Pressure to buy RIGHT NOW. Be skeptical if the promoter pitches the investment as a "limited time only" opportunity, especially if the promoter claims to base the recommendation on "inside" or confidential information.
Sounds too good to be true. Exercise caution if the investment sounds too good to be true. Investments providing higher returns typically involve more risk.
Investigate the Investment Newsletter
Search SEC.gov and contact your state securities regulator to see if any regulatory actions have been taken against the investment newsletter or anyone associated with it.
Use the SEC’s IAPD website or the Financial Industry Regulatory Authority (FINRA)’s BrokerCheckwebsite to check the background, including registration or license status and disciplinary history, of any individual or firm recommending a stock. Some entities that issue investment newsletters are registeredwith the SEC as investment advisers and have certain responsibilities and obligations. If a newsletter provides a disclaimer stating that it is not published by a registered investment adviser, keep in mind that the entity issuing the newsletter is disclaiming these responsibilities and obligations.
Before making any investment based on information in an investment newsletter, independently and thoroughly investigate the investment opportunity. For more information about how to evaluate a potential investment, read our publication Ask Questions.
Valeant and Ackman Break From the Deal Playbook, Yet AgainIn the last week, a joint bid for Allergan, the maker of Botox, has evolved from an already unusual deal into one of the most confounding takeover attempts in recent memory.
Reuters Breakingviews: Valeant's Achilles' HeelThe premium and increased cash may help bring Allergan to the negotiating table. But questions over Valeant's own stock remain its weakness, says Robert Cyran of Reuters Breakingviews.
The Sexy Golf Angle to the Latest Insider Trading ScandalWilliam T. Walters, the Las Vegas gambler at the center of the insider trading inquiry involving Carl Icahn and Phil Mickelson, runs a caddy service featuring "extremely attractive" women.
Goldman Names New Chief Strategy OfficerGoldman Sachs named Stephen M. Scherr as its new chief strategy officer on Monday, replacing Andrew A. Chisholm, a longtime executive of the firm who is retiring at the end of the year.
White Collar Watch: The Perils of a Circumstantial Insider Trading CaseMoving from suspicion of insider trading to proving a violation requires much more than just timely trading and vague connections, Peter J. Henning writes in the White Collar Watch column.
Another View: Measuring the Apology of Network Rail in BritainIn the second installment of the Apology Metrics series, Dov Seidman invites readers to participate in a survey on the apology of Network Rail of Britain.
Broadcom Explores Options for Its Baseband BusinessShares of the semiconductor maker Broadcom surged in early trading on Monday after the company said it was exploring strategic alternatives for its cellular baseband chip business.
2 Private Equity Firms in Talks for Medical Device MakerThe private equity firms are leading a consortium that is in exclusive talks to acquire the French medical device company Sebia from its private equity owner, Cinven.
Endurance Raises Bid for Aspen Insurance and Vows Proxy FightEndurance Specialty Holdings' new bid of $3.2 billion is a small bump from its previous offer, but the company said it was pressing ahead with an effort to force Aspen Insurance Holdings to sell.
Ventas to Buy American Realty Capital Healthcare for $2.6 BillionVentas, the nation's biggest health care real estate investment trust, announced two acquisitions on Monday aimed at cementing its position in health care and "senior living" properties.
A Question of Family Ties Between G.E. and Alstom Law FirmSome French media outlets have raised a fuss that G.E.'s chief executive shares family ties with the incoming chief executive of a law firm that works for Alstom.
GlaxoSmithKline in $350 Million Cancer Drug VentureThe deal with the biotechnology company Adaptimmune comes a little over a month after Glaxo agreed to sell its cancer drug business to the Swiss pharmaceutical maker Novartis.
Roche to Pay Up to $350 Million for DNA Sequencing BusinessThe Swiss company will pay $125 million in cash for Genia Technologies of California, plus as much as $225 million in contingency payments if the business reaches certain milestones.
Marathon Oil Sells Norwegian Unit for $2.1 BillionMarathon sold its Norwegian business to Det Norske Oljeselskap of Norway and said it had called off the sale of its British business after failing to receive an acceptable offer.
Carmakers to Report Sales of New VehiclesAutomakers on Tuesday will report new-vehicle sales in the United States for May. Industry analysts expect strong results, as consumer demand for new cars and trucks continues to grow after sluggish sales earlier in the year. General Motors will be watched closely for signs that car buyers are avoiding its brands because of safety recalls.
Europe's Bank to Decide on Stimulus MeasuresThe European Central Bank is expected to offer a package of measures to stimulate lending in the euro zone economy, including an interest-rate cut and a penalty rate for banks to park money in central bank vaults. But the central bank is not expected to introduce major asset purchases, which many economists say are needed to prevent deflation. Bank officials will make their decision after official inflation data for May and the unemployment figures for April come out on Tuesday.
Data on Hiring and UnemploymentOn Friday, the Labor Department will report on job creation and the unemployment rate in May. Economists polled ahead of the release are expecting to see a reasonably healthy gain of 218,000 in payrolls, with the unemployment rate rising by 0.1 percentage point, to 6.4 percent, as more people look for work. But these numbers have been volatile of late. A surprisingly weak showing at the beginning of 2014 was followed by a strong pickup, so Wall Street will be watching the labor market.