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Secretary of State Cautions Public to Beware of Investment Scams in 2012
Posted Date: 12/28/2011

Contact: Catherine Lu
(702) 486-6982 / 334-7953  

(Carson City, NV; Dec. 28, 2011) — As 2012 quickly approaches and households begin to organize their finances for the New Year, Secretary of State Ross Miller encourages the public to learn about popular investment scams so as not to become victims of fraud.

“As we evaluate our finances from 2011 and plan for 2012, Nevadans should be alert to several cons that appear to be legitimate investments,” said Secretary Miller. “Our securities division investigates cases of fraud all year-round, and a little education goes a long way in prevention.”

The securities division notes an increase in popularity among the following investment opportunities:

  • Regulation D Offerings

Businesses that file for Regulation D (Reg D) offerings are not required to register their securities or file reports with the Securities Exchange Commission (SEC), allowing small companies to access capital markets without the costs of normal SEC registration. Reg D companies must file “Form D” to the SEC after selling securities. Anyone interested in investing in Reg D companies should conduct a background search on the SEC’s EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system ( to confirm that they properly file “Form D.” If companies do not show up on the database, it is an indication that they may not be in compliance with federal securities laws.

  • Penny Stock Companies

The securities division also notes an increase in popularity in penny stock investments. Companies sell their stock shares for less than a dollar, which allows an individual or organization to purchase hundreds of thousands of shares, and then utilizes press releases or websites to manipulate the perception of its worth. When investors buy stock and drive up demand, the price of shares increase and the original individual or organization sells its holdings. The other investors then have a difficult time selling their shares because penny stock companies tend to have low liquidity.

  • Affinity Fraud

Although affinity fraud does not define any specific type of investment, it is a prevalent scam that targets members of particular groups, such as the elderly, industry professionals and religious or ethnic communities. Swindlers elicit trust by pretending to be a member of a group and defraud their victims with different scams, such as pyramid schemes.

The securities division says current and potential investors should take time to research and understand the investments they’re considering. A few simple steps could prevent an individual from falling victim to fraud.

  • Recognize what needs to be regulated, such as a Nevada business entity license, securities, brokerage firms and individual brokers.
  • If a broker is placing undue pressure on potential investors to sign documents as soon as possible, consider it a red flag. Take the time to read through and understand all of the documents first. If it sounds too good to be true, it usually is.
  • Contact state securities regulators at (702) 486-2440 or (775) 687-9950 to see if they have more information about the company and whether regulators have cleared the offering for sale in Nevada.
  • Use the Financial Industry Regulatory Authority (FINRA) BrokerCheck to search for brokerage firms or individual brokers to ensure they are properly licensed. The database will display currently FINRA-registered brokerage firms or individuals, if they have been registered with FINRA in the last 10 years and if they have ever been the subject of regulatory event or crime.

For more tips on investing and securities, visit the Secretary of State’s Securities Center at

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