Is it Independent Research or Paid Promotion?

The Inter-Global Financial Regulatory Board is encouraging the public to consider the difference between marketing publications and investment advice. Unsolicited investment newsletters are commonly sent out by fax and e-mail by firms that are paid to promote investments. Before you act on the material, consider that it may not give you a balanced picture.

Promotional Language:

  • Headings such as "Hot Tip" and "Special Alert" will attract your attention to information that seems authoritative and professional, but may not provide the whole story.

  • Statements like "the potential to make our readers wealthier than they ever imagined"- potential is not a guarantee.

  • Claims that other smart investors are already following this advice - in the hopes that you will follow the crowd.

What you should watch out for:

  • Fine print that contradicts what's promised in the newsletter. Look for statements like "The reader assumes all risk as to the accuracy and the use of this document."

  • Free stock research that you didn't ask for. Chances are that someone who doesn't know anything about you or your investment objectives doesn't have your best interests in mind

  • Promotions for companies that are not listed on a stock exchange. These companies may be subject to less regulation and have fewer disclosure requirements - which means higher risk

  • References to current events like commodity shortages and global terrorism to create a sense of urgency. These are high-pressure sales tactics.

 

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