Use Caution When Considering Online Investments

WALLINGFORD — The Internet serves as an excellent tool for investors, allowing them to easily and inexpensively research opportunities. But the Internet is also an excellent tool for con artists. The types of investment fraud seen online mirror frauds perpetrated over the phone or through the mail. Scam artists can use a variety of Internet tools to spread false information, including bulletin boards, online newsletters, spam, or live “chat” rooms. They can also design a glitzy, sophisticated Web page.

The Better Business Bureau, along with the Securities and Exchange Commission (SEC), urge consumers to use caution when considering online investments. If you want to invest wisely and avoid scams, get the facts. Never, ever, make an investment based solely on what you read in an online newsletter or bulletin board posting, especially if the investment involves a small, thinly-traded company that isn’t well known. Don’t invest in small companies that don’t file regular reports with the SEC, unless you are willing to investigate each company thoroughly and to check out every statement about the company. For instance:

Get financial statements from the company and be able to analyze them;

Verify the claims about new product developments or lucrative contracts;

Call every supplier or customer of the company and ask if they really do business with the company; and

Check out the people running the company and find out if they’ve ever made money for investors before.

Contact your BBB at 203/269-2700 ext. 2, your state securities regulator, and the National Association of Securities Dealers, Inc (800/289-999 or http://www.nasdr.com). The BBB advises consumers to consider all offers with skepticism. Be alert for the following telltale signs:

Be wary of promises of quick profits, offers to share “inside” information, and pressure to invest before you have an opportunity to investigate.

Be careful of promoters who use “aliases.” Pseudonyms are common online, and some salespeople will try to hide their true identities. Be on the lookout for other promotions by the same person.

Be wary of opportunities that promise spectacular profits or “guaranteed” returns. If it sounds too good to be true, then it probably is.

Be extra careful when considering any investment opportunity that comes from another country. It is difficult for US law enforcement agencies to investigate and prosecute foreign frauds.