COVID19 Investment Scams Become Focal Point of Securities Regulators

Orrick, Herrington & Sutcliffe LLP

Orrick, Herrington & Sutcliffe LLP

The Massachusetts Securities Division (the Division) warns that the average investor is overwhelmed by the COVID-19 pandemic. The Division points to several COVID-19-related items such as physical isolation, job uncertainty and financial strain as elements that may make the average investor more susceptible to fraud, especially with regard to retirement savings. The notice from the Division warns that some schemes may promote companies that claim to be able to prevent, identify or cure COVID-19. Additionally, many schemes are intended to “exploit investor panic” during the COVID-19 pandemic. The Division identifies specific instances of which investors should be aware, including:

  • Claims made by companies related to the prevention, detection or cure of COVID-19;
  • Claims of high returns with little to no investment risk;
  • Claims of high returns in return for a small upfront investment; and
  • Any investment pitch creating a false sense of urgency and requiring an immediate investment decision.

In addition to the Division, the U.S. Securities and Exchange Commission and a number of other state securities regulators continue to warn investors of investment scams involving COVID-19. Similar notices have been published by regulators in, among other states, New York, California, Texas, Pennsylvania, Florida, Washington and Delaware. Additionally, the Financial Industry Regulatory Authority (FINRA) has warned of fraudulent phishing emails purporting to be from FINRA and reminded firms to beware of fraud during the COVID-19 pandemic. State regulators also are warning investors to protect their personal information by making sure that their computers and other electronic devices are updated with the most recent software and that their accounts have multi-factor identification in case their username and password are stolen. As always, regulators (and the FBI) warn investors to be wary of opening any links included in unsolicited emails or emails that appear out of the norm from known associates.

Investors are reminded to continue to be vigilant with their investments and their personal information, diligence that must be heightened during any time of volatility, including the COVID-19 pandemic.



DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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