SEC Warns against Government Impersonators and Disseminators of False Information on Microcap Stocks

The SEC issued two guides that warn investors to be wary of (i) government impersonators who target previous fraud victims in order to impose phony loss-recovery fees and (ii) the distribution of false information about “microcap stocks,” or low-priced stocks issued by small companies.

The first investor guide warns of government impersonators who target the prior victims of investment fraud. The guide explains that impersonators often will claim to help investors recover their investment-related losses for a fee, which may be disguised as a tax, deposit or refundable insurance bond.

The second investor guide reviews the basics of microcap stocks, including how they trade and where they differ from other stocks. The guide also educates investors about the kinds of fraud that are associated with the stock – specifically, the ease with which fraudsters can spread false information due to the relative lack of available data about microcap stocks. The guide also offers advice on finding accurate information, red flags to consider, and where investors should turn if they run into issues when trading microcap stocks.

Lofchie Comment: The SEC’s first investor guide did not address the issue of candidate impersonators.