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Investors Are Warned Of New Scam

From the May 16, 2008 edition, Wall Street Journal (Eastern edition, New York), Page C3.

By Mike Barris

Con artists are passing themselves off in emails to investors as employees of the Financial Industry Regulatory Authority, in a twist on advance-fee fraud.

Fraudsters have been "misusing Finra's name and impersonating Finra employees in email communications in an apparent attempt to lend a false air of legitimacy to their schemes," the regulator warned Thursday. The scam is aimed at international investors and involves low-priced U.S. securities.

Finra is the nongovernmental regulator of securities firms doing business in the U.S. It was created from a merger of the National Association of Securities Dealers and regulatory functions of the New York Stock Exchange.

According to U.K. investors, the scam goes something like this: A victim who purchased a low-priced security in the past receives an unsolicited call from supposed brokers offering to buy back shares of the almost worthless stock -- but only if the investor will pay an administrative fee in advance.

"To build trust, the fraudsters send an email purportedly from Finra that appears to verify that the firm is 'properly licensed by Finra to perform transfer or stock recovery functions' in the investor's country," Finra said. "A copy of the firm's Finra BrokerCheck report is attached to the email. But the report has been altered to remove the legitimate firm's phone number and the email is signed by a representative of 'Finra Shareholder Support.'"

The regulator said there is no such group and that it "does not send copies of BrokerCheck reports as a follow-up to a sales call by a securities firm."

John Gannon, the regulator's senior vice president for investor education, said Finra is "extremely concerned that investors may be taken in by this attempt to hijack Finra's identity to lend credence to a scam."

Finra's regulatory responsibilities "do not include assisting investors in 'contacting properly licensed brokers and transfer agents,' as the fraudulent emails state," Mr. Gannon said.