US investors warned against 'China' stocks
Updated: 2007-04-24 08:57
The US National Association of Securities Dealers, the brokerage industry's self-policing organization, issued an investor alert Monday regarding "pump and dump" scams touting bogus stocks with promises of astronomical returns. Faxes carry headlines such as "Grabbing massive profits in China has never been easier than right now!" the NASD said.
The word "China" in a company's name can be misleading, and most of the companies being promoted are not even incorporated in that country, according to the organization.
"The best way to avoid being taken in by a scam is to ignore these unsolicited stock recommendations or, at the very least, investigate the company and its claims before investing," NASD Chairman and CEO Mary Schapiro said in a statement.
The organization said the hyping of phony "China" stocks is the latest variation on the classic "pump and dump" stock scheme, in which the perpetrators get people to buy stocks to inflate their prices and then sell their blocks of shares at a profit. Ordinary investors can suffer heavy losses when the prices tank amid the subsequent dumping of stock.
The NASD also urged investors to report the scams by forwarding spam e-mails to spam@nasd.com.
The investor alert, "'China' Stocks -- Look Beyond the Name Before You Invest," is available on the NASD's Web site at http://www.nasd.com.
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