CONSUMER AFFAIRS: Social media and investing

The Security and Exchange Commission issued an investor alert on Jan. 4, cautioning investors to be better aware of fraudulent investments schemes that may involve social media.

While social media outlets such as Facebook, You Tube, Twitter, and other online networks can provide investors with useful information, social media also can present opportunities for fraud.

The SEC suggests that you be wary of unsolicited offers to invest and consider some of the common red flags.

Of course, investments sounding too good to be true probably are.

Also, since investments by their nature pose some risk, promises of guaranteed returns should raise red flags. High-pressure sales pitches also can be problematic.

Affinity fraud, involving pitches made through an online group to which you belong, can be particularly attractive to fraudsters using social media outlets. The person telling you about an investment could have been fooled into doing so.

It is important to guard your personal financial information when using social media, as well.

The SEC reviews some common investment scams in its alert.

One example given by the agency is the "pump–and–dump," which can involve false claims and pitches of particular stock made through social media outlets designed to pump up particular stock prices. The price of a stock can fall when the hype ultimately ends and fraudsters dump their shares.

For other examples and additional information, see "Investor Alert: Social Media and Investing – Avoiding Fraud" (available at www.investor.gov ).

Opinions are solely the writer's. Joseph Pellicciotti is a lawyer, professor, and vice chancellor at Indiana University Northwest.