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SEC Issues Alert Warning Individual Investors to Be Wary of Celebrity Endorsements

January 26, 2018 Blog

The Securities and Exchange Commission (SEC) regularly issues Investor Alerts warning of trends in investment fraud scams and other particular concerns for individual investors. Recently, the SEC published an alert highlighting the risks of making investment decisions based solely upon celebrity endorsements. According to the agency:

“Celebrities, from movie stars to professional athletes, can be found on TV, radio, and social media endorsing a wide variety of products and services – sometimes even including investment opportunities.  But a celebrity endorsement does not mean that an investment is legitimate or that it is appropriate for all investors.  It is never a good idea to make an investment decision just because someone famous says a product or service is a good investment.

While many celebrities take their endorsements very seriously and seek to avoid recommending unsafe products or risky investments, even those who perform their due diligence (or have their business managers conduct their due diligence for them) can unexpectedly find their names and likenesses being used to promote fraudulent investments. This is typically the case where:

  • A fraud artist misrepresents an investment in order to obtain a celebrity endorsement; or,
  • A fraud artist uses a celebrity’s name or likeness without the celebrity’s knowledge.

Tips for Avoiding Investment Losses Due to a Fraudulent Celebrity Endorsement

There are a number of steps individual investors can take to minimize their risk of losing money due to a fraudulent celebrity endorsement. For example, the SEC recommends:

  • Do a background check on the broker, advisor or firm offering the investment. The SEC’s investment advisor database and FINRA BrokerCheck are good places to start, and you can ask for client references as well.
  • Carefully read all information you receive about the investment, including the company’s finances and business prospects. You should receive an investment prospectus before being asked to invest, and you can download financial disclosures through the SEC’s EDGAR database.
  • Make sure you understand the costs and fees you will incur if you invest, and make sure you understand the level of risk involved with the investment. Do not rely solely on a broker’s recommendations (especially if it is a broker you don’t know), and be wary of the red flags of investment fraud scams.

Of course, even if a celebrity endorsement is legitimate, this does not mean that the investment is right for everyone. All individual investors should do their own research before investing, and seek professional advice if they have concerns about an investment opportunity’s risk or legitimacy. If you have suffered financial losses after investing based upon a celebrity endorsement, we encourage you to contact us promptly for a free consultation.

Speak With an Investment Fraud Attorney at Zamansky LLC

Zamansky LLC is a national investment fraud law firm that helps individual investors recover their investment losses. We provide free initial consultations; and, in most circumstances, we do not charge any fees unless we secure a financial recovery. To speak with an experienced investment fraud attorney in confidence, please call (646) 663-5628 or contact us online today.