The SEC has issued a fraud alert to help protect individuals who may receive lump sum payouts from insurance companies and others following Hurricane Sandy.

The agency's Office of Investor Education and Advocacy said hurricanes, floods, oil spills and other disasters often give rise to investment scams.  

These scams can take many forms, including promoters touting companies purportedly involved in cleanup efforts, trading programs that falsely guarantee high returns, and Ponzi schemes where new investors' money is used to pay money promised to earlier investors, the SEC said.

In addition to asking questions such as if the person is licensed and whether the investment they are promoting is registered with the SEC or with a state, the agency said if a lump payment is received, the investor should take a close look at their entire financial situation before making any investment decision.

The SEC said it has brought a number of enforcement actions against individuals and companies who made false and misleading statements about alleged business opportunities in light of the damage caused by Hurricane Katrina.

Some of those cases involved pump-and-dump scams where fraudsters use fake news to pump up the stock price of small companies so they could sell shares they own at artificially high prices, the agency said.

The SEC has a list of online resources to address investment fraud as well recent enforcement action cases.

 

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