The oil spill in the Gulf of Mexico poses more than an environmental and economic threat to the region. It also poses a financial threat to investors in the form of scams promising financial gains from investments in companies that claim to be involved in cleanup operations.
Millions of dollars are being spent daily on short-term cleanup of the spill, which began in April 2010 with a blowout at an oil-drilling platform off the coast of Louisiana. The cost of long-term remediation remains unknown given the uncertainty about the extent of damage to the environment, the fishing industry and tourism.
The staff of the Securities and Exchange Commission and FINRA are issuing this alert to warn investors about potential scams that exploit the Gulf oil spill and related cleanup efforts. While some of the companies touting their role in the cleanup may be legitimate, others could be bogus operations that are only looking to clean out unsuspecting investors.
In a recent action, on May 25, the SEC suspended trading in shares of ACT Clean Technologies Inc., of Huntington Beach, Calif. The Commission took this action because of questions about the accuracy and adequacy of publicly disseminated information concerning, among other things: (1) British Petroleum’s purported expression of interest in using a so-called oil fluidizer technology purportedly licensed to ACT’s wholly-owned subsidiary for use in cleanup operations in the Gulf of Mexico; and (2) the purported results of field tests finding that the oil fluidizers are effective for use in cleanup efforts in the Gulf of Mexico.
Spotting Potential Oil Spill Stock Scams:
Some companies may issue press releases, or send unsolicited faxes or spam emails that might include:
- *Claims to have products or technologies that are effective in remediating oil spills or restoring the eco-system
- Mention of contracts or expected contracts with BP, formerly British Petroleum, that will aid the cleanup effort
- Claims that the company is providing technical assistance or expertise to BP or to U.S. government agencies such as the Coast Guard or the Environmental Protection Agency
- Predictions of rapid, exponential sales growth
- Pressure to invest immediately
How to Avoid Getting Scammed:
Here are some tips to avoid potential scams:
- Investigate before you invest. Never rely solely on information contained in an unsolicited fax, email, text message or tweet—or in a blog post or online thread. It’s easy for companies or their promoters to make glorified claims about product effectiveness, lucrative contracts, or the company’s revenues, profits or future stock price.
- Find out who sent the message. Many companies and individuals that tout stocks are paid to do so by the company being touted. Examine the fine print for any statements indicating payments in cash or instock for issuing the report or message.
- Find out where the stock trades. Most unsolicited fax and spam recommendations involve stocks that do not meet the listing requirements of the major stock exchanges. Instead, they usually are quoted on the OTC Bulletin Board or in the Pink Sheets, which do not impose minimum qualitative standards. Many of the securities quoted on the OTC Bulletin Board or in the Pink Sheets trade infrequently, which can make it difficult to sell your shares. When shares on the OTC Bulletin Board or in the Pink Sheets do trade, they may move up or down in price very rapidly.
- Read a company’s SEC filings. Most public companies file quarterly and annual reports with the SEC. Check the SEC’s EDGAR database to find out if the company is filing reports to the SEC, and read them. Be aware that registering securities and filing reports with the SEC does not mean the company will be a good investment.
- Exercise some skepticism. Scammers are very adept at making their pitches appear real, including the use of slick videos and websites. Be extremely wary of any pitch that suggests immediate pay-offs, especially if the investment involves a start-up company or a product or service that is still in development.
If you’re suspicious about an offer or if you think the claims might be exaggerated or misleading, please contact us:
SEC Office of Investor Education and Advocacy
FINRA Complaint Center
- Hurricane-related Investment Scams
- ACT Clean Technologies, Inc. Trading Suspension (.pdf)
- Pump and Dump Schemes
The Office of Investor Education and Advocacy has provided this information as a service to investors. It is neither a legal interpretation nor a statement of SEC policy. If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law.