Identifying Affinity Fraud- Part 2
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Many investors and potential investors are turning to social media and online search tools for research on particular stocks, background information on a broker-dealer or investment adviser, guidance on an overall investing strategy, up-to-date news, or to simply discuss the markets with others.                           

Their exposure to risk from online fraudsters has increased significantly and if they are not properly informed about these risks, then they may become victims of online fraud.

While social media can provide many benefits for investors, it also presents opportunities for fraudsters. Social media, and the Internet generally, offer a number of attributes that criminals may find attractive.

Some of these include:

  • Low cost of operation
  • Easy to create a: site, account, or direct message, that looks and feels legitimate
  • It can be difficult to track down
  • Anonymity – Makes it harder for fraudsters to be found and held accountable

As a result, investors need to use caution when using social media to consider an investment. The key to avoiding investment fraud on the Internet is to be an educated investor.

Here’s what you need to consider and look out for.

Look out for unsolicited offers to invest

Fraudsters look for victims on social media sites, chat rooms, and bulletin boards. If you see a new post on your wall, a tweet mentioning you, a direct message, an e-mail, or any other unsolicited – meaning you didn’t ask for it and don’t know the sender – communication regarding a so-called investment opportunity, you should exercise extreme caution. For example, with a bulk e-mail, spammers can send personalised messages to millions of people at once, for much less than the cost of cold calling or traditional mail.

 

Look out for the “RED FLAGS” –

  1. ‘If it sounds too good to be true,’ kind of investment.
  2. “Guaranteed returns”
  3. Pressure to buy now, limited offers,

 

Look out for Online Affinity Fraud

Never make an investment based solely on the recommendation of a member of an organization or group to which you belong, especially if the pitch is made online.

An investment pitch made through an online group of which you are a member, or on a chat room or bulletin board catered to an interest you have, may be an affinity fraud.

Even if you know the person making the investment offer, be sure to check out everything – no matter how trustworthy the person seems.

Be aware that the person telling you about the investment may have been fooled into believing that the investment is legitimate when it is not.

 

Take a look at your privacy and security settings

Ensure you know where these are and regularly review your privacy settings for all your online platforms – email and social media accounts.

 

Check out everything.

When in doubt, check with the Trinidad and Tobago Securities and Exchange Commission first to see if the investment, broker dealer, or organisation issuing the investment is registered with the Commission.

 

Adapted from: https://www.sec.gov/investor/alerts/socialmediaandfraud.pdf   

Read more about common investment scams using social media and the internet right here.