The Securities and Exchange Commission has issued an investor alert as a result recent fraud cases relating to investments in private securities offerings for oil and gas ventures. The SEC identifies the following Common Red Flags:
- Sales pitches referring to recent news events like high oil or gas prices.
- “Can’t miss” wells and “guaranteed” returns, including claims that major oil and gas companies are drilling nearby.
- Abnormally high rates of return.
- Unsolicited materials.
- Sales tactics that pressure you to decide, like “limited” or “once-in-a-lifetime” opportunity.
- Sales pitches touting new technology, especially if it relates to getting higher production out of low-producing wells (sometimes called “stripper” wells).
- Salesperson claims to be an investor.
- Being asked to sign documents acknowledging that the securities laws do not apply to the investment.
Even if you are working with a registered broker or adviser, it is not a seal of approval. Oil and gas offerings present many investment risks, and working with a registered individual is not a guarantee that the offering is a sound investment. Ask about any prior history of selling oil and gas offerings and if those offerings failed, the vetting or due diligence process for such offerings, and the risks of the particular investment you are considering.
You can see the alert here.