Nutraceutical Stock Scams a Hazard to Your Portfolio's Health: FINRA

Author(s): 
Donald Liebenson
“Nutraceuticals” are health-related products that seem too good to be true. They promote weight loss, energy boosts, improved virility, and relief from the common cold. But as a new Financial Industry Regulatory Authority (FINRA) warning cautions, investing in companies that deal with these products could be hazardous to your portfolio’s health.
“While some of the companies producing these products are legitimate,” FINRA announced in a statement, “others could be bogus operations with the potential to harm unsuspecting investors.
Nutraceuticals range from energy drinks and fortified foods to “natural medicines.” They may be New Age, the ploys used to lure investors are classic Old School fraud, FINRA warns.
Whether by phone, fax, email, infomercial, tweet, blog or message board post, fraudsters “may try to lure with you very aggressive, optimistic and potentially false and misleading statements or press releases that create unwarranted demand for shares of some small, thinly-traded company that often has little or no history of financial success,” FINRA alerts. “The con artists behind the scam can then sell off their shares, leaving investors with worthless stock.”
One company FINRA cites issued a press release that it “has the potential to capture 3 percent of the U.S. market within a three-year period” and “potentially generate $100,000,000 in revenues” for its “all-natural medicines” that could treat maladies ranging from the common cold to kidney disease. The company, in truth, had almost no cash on hand or a track record of sales.
FINRA suggests you be on the alert for these other scam signals:
·         Price targets or predictions of swift and exponential growth. FINRA tells of one promotional mailer from a nutraceutical manufacturing company that promised it could produce “813 percent Short Term Gains.”
·         Unsolicited communications promoting the opportunity.
·         References to well-known companies to justify growth projections.One company FINRA cited claimed its brand could “compete with the likes of Gatorade and grad mega talent like NIKE!”
How can you avoid the perils of these potential scams? Here are recommended tips:
·         Consider the source. Never rely on unsolicited communications or claims.
·         Always ask, ‘Why me?’ Why would a total stranger tell you about this great investment opportunity? The answer, FINRA states, “is that there is no such opportunity.”
·         Exercise skepticism. A great investment opportunity? Immediate pay-off? Be wary. Be very wary.
·         Find out where the stock trades.
·         Read a company’s SEC filings, if available.
·         Watch for changes to a company’s name or business focus.
·         Check out the person promoting the stock or investment. Depending on the type of business the firm conducts,  a legitimate investment salesperson must be properly licensed and his or her firm must be registered with FINRA, the Securities and Exchange Commission (SEC) and a state securities regulator.
Related Content: 
Consumer Fraud Complaints on the Rise--How to Protect Yourself Against Scammers
How to Protect Yourself Against Online Investment Fraud

Source: http://www.millionairecorner.com/article/nutraceutical-stock-scams-hazard-your-portfolios-health-finra

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