NASAA’s Annual List Identifies Top Investor Threats for 2022
On January 10, 2022, the North American Securities Administrators Association (NASAA) released its annual list of top investor threats (the Annual List) and urged caution regarding products such as cryptocurrencies and digital assets. The Annual List is based on a survey of regulators who were asked to name the most threatening investment products, practices, and schemes in 2022. The NASAA is a North American association of state, provincial, and territorial securities regulators in the United States, Canada, and Mexico.
The Annual List follows on the heels of the NASAA’s 2021 Enforcement Report, and several common themes are present. The Annual List names the following as the most-cited risks to investors:
Investments tied to cryptocurrencies and digital assets.
Fraud offerings related to promissory notes.
Money scams tied to investment offers made through social media and the internet.
Financial schemes connected to self-directed individual retirement accounts (self-directed IRAs).
The Annual List offers further information as to these cited risks, available at the NASAA’s Fraud Center.
Regarding cryptocurrencies and digital assets, the NASAA reminds investors that such financial products are not “neatly” regulated and therefore are more vulnerable to fraud by promoters. The Annual List’s commentary also discusses private offerings or private placements, which underlie many instances of investment fraud. Private placements, intended to enable smaller businesses to raise capital, are exempted from registration requirements under the Securities Act of 1933 and Securities and Exchange Commission (SEC) Regulation D. Private placement investments, largely reserved for accredited investors meeting certain net worth and income requirements, generally offer less robust disclosures and are illiquid in nature, making them difficult to resell.
NASAA also provides advice for retail investors to identify and avoid investment scams. These tips include being wary of potentially phony websites, not placing significant weight on easy-to-fake customer reviews or testimonials, and exercising skepticism when an investment opportunity offers quick and guaranteed returns. Investors are also advised to not use hyperlinks provided by unfamiliar parties, and to independently research investment firms by using the Financial Industry Regulatory Authority’s (FINRA’s) BrokerCheck and the SEC’s Investment Adviser Public Disclosure websites. These online resources provide, among other things, securities industry registration information and disciplinary histories.
The attorneys of Giarrusso Law Group LLC have considerable experience with issues unique to the financial services industry, including federal and state legislative and regulatory developments affecting both investors and financial advisors. If you have a question about this recent announcement or any other industry matter, you may contact us at (201) 771-1115 or info@gialawgroup.com for a free and confidential consultation.