RICHMOND — The State Corporation Commission (SCC) urges Virginians
to use caution when seeking safer and more profitable places to put their money
amid continued economic uncertainty and a changing investing landscape.
Unwary investors continue to be introduced to longstanding or emerging threats.
The most recent rash of suspect offers attempts to exploit new and existing federal
laws designed to promote job creation and stimulate economic recovery.
Ronald Thomas, director of the SCC’s Division of Securities and Retail Franchising,
encourages Virginians to investigate thoroughly before investing their hard-earned
money. He reminds investors that even some legitimate investment opportunities may
be risky and complex and may not be suitable for a particular individual.
“Be especially wary of investment opportunities that promise high returns with little
or no risk,” Thomas said. “Before you invest, find out if both the salesperson and
the investment are registered in Virginia and obtain written information that fully
explains any investment before you hand over your money.”
Thomas urges investors to be wary of the following new investment opportunities:
- Crowdfunding and Internet Offers – An online
money-raising strategy designed to make it easier for small businesses and startups
to raise capital, crowdfunding is a provision of the Jumpstart Our Business Startups
(JOBS) Act enacted by Congress in April, 2012. Rules implementing a new exemption
to allow crowdfunding are not expected to be adopted by the Securities and Exchange
Commission until early 2013. Until those rules are adopted, any offers or sales
of securities that claim to rely on the crowdfunding exemption are unlawful under
federal securities laws. Investments through crowdfunding will not carry the same
consumer protections as other investment offerings and even legitimate offers will
carry a certain degree of risk.
- Use of Self-Directed IRAs to Mask Fraud –
To lend credibility to fraudulent ventures, offerers may misrepresent the responsibilities
of self-directed IRA custodians or exploit the tax-deferred characteristics of these
investment products. Self-directed IRAs allow investors to hold alternative investments
such as real estate, mortgages, precious metals, and private placement securities
for which financial and other information may not be readily available. While self-directed
IRAs can be a legitimate way to hold retirement assets, investors should be mindful
of potential fraudulent schemes when considering investments for their self-directed
“Investors should insist on working only with licensed securities brokers and investment
advisers in dealing with both traditional and alternative securities investments,
and should quickly report any suspicion of investment fraud to their state securities
regulator,” Thomas said.
For more information, call the Securities Division in Richmond at (804) 371-9051
or toll-free in Virginia at 1-800-552-7945 or visit its website at www.scc.virginia.gov/srf
or visit the North American Securities Administrators Association’s website at www.nasaa.org.