Investors should be aware that false statements may be made -- including in company press releases, promotional materials, and social media posts -- about a company offering or developing products that prevent, detect, or treat COVID-19, in order to inflate the value of a company’s stock. Fraudulent stock promotions of these companies also may be made through “research reports” that make predictions of a specific “target price.” Never invest in a company based solely on information in a press release or stock promotion. If claims about the company’s products are inaccurate or unreliable, you may lose a lot of the money you invest.
Since the beginning of the COVID-19 pandemic, the SEC has brought numerous enforcement actions against companies for making false and misleading claims about purported COVID-19 related products, including a mobile app for detection, medical and personal protective equipment (PPE), diagnostic tests, facemasks, and thermal temperature scanners. To learn more about SEC enforcement actions relating to COVID-19, visit the SEC Coronavirus (COVID-19) Response webpage.
In addition to bringing enforcement actions, the SEC has suspended trading in dozens of companies in connection with COVID-19 related statements. The SEC can suspend trading in any stock for up to 10 days when, for example, it believes that information about a company is inaccurate or unreliable. In deciding whether to purchase shares of a company, consider that if the SEC suspends trading in the company, you may be unable to sell your shares until the trading suspension is lifted, or even after.
Beware of Pump and Dump Schemes
False claims about a company’s products and services in some cases may be part of a “pump-and-dump” scheme where fraudsters profit at the expense of unsuspecting investors. Promoters “pump” up, or increase, the stock price of a company by spreading positive, but often false, rumors. These rumors cause many investors to purchase the stock. Then the promoters or others working with them quickly “dump” their own shares before the hype ends. Typically, after the promoters profit from their sales, the stock price drops, and the remaining investors lose most of their money.
Research Before Investing
Whether or not it relates to COVID-19, you should be suspicious anytime you receive an unsolicited (meaning you didn’t ask for it) stock recommendation. Similarly, you should be skeptical if you are pressured to buy a stock quickly. Always learn as much as you can about a company before investing. Use the SEC’s EDGAR database to review information about a publicly traded company’s finances and operations in filings the company makes with the SEC.
We urge investors to thoroughly research any investment opportunity. Do not let FOMO (fear of missing out) on a hyped up investment involving COVID-19 cause you to lose your money to a fraud.
Frauds Targeting Main Street Investors -- Investor Alert
Updated Investor Alert: Fraudulent Stock Promotions
NASAA news release: Task Force Takes More Than 200 Actions to Protect Investors From Fraudsters Seeking to Profit from the Pandemic
Call OIEA at 1-800-732-0330, ask a question using this online form, or email us at Help@SEC.gov.
Visit Investor.gov, the SEC’s website for individual investors.
Report possible securities fraud to the SEC.
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