As gold soars, regulator sounds fraud warning

As precious-metals enthusiasm rises, investment regulators have noticed a proliferation of blogs, websites, YouTube videos and Tweets focused on buying gold. And while many pitches are legitimate, FINRA, or the Financial Industry Regulatory Authority, is worried about scams.

The group has released a new investor alert, "Gold Stocks - Some Investments Mine Your Pocketbook," to warn about possible scams. The release can be read under the "Investors" section at finra.org.

According to FINRA, scams often center on inflated claims regarding the stocks of gold mining companies, based on gold reserves that are difficult to estimate and verify. According to FINRA, the Securites and Exchange Commission recently took legal action against a Florida mining company for issuing false news releases claiming that its mining project in Ecuador contained reserves worth more than $1 billion.

According to FINRA, gold investments sometimes are touted at free-lunch seminars or pushed by boiler-room telephone operations.

"Con artists are using the run-up in the price of gold as a hook to part investors from their money," said Gerri Walsh, FINRA's vice president for investor education, in a statement. "Investors should think twice before investing in any gold investment promising exponential returns or any company that claims it is a buyout target for other mining companies."

FINRA's alert cautions investors to beware pitches that:

-?Claim to tie a company's stock performance to the general rise in gold prices.

-?Use scare tactics such as the threat of inflation or an economic meltdown.

-?Suggest that a small mining stock could be a buyout target of a larger company.

-?Make speculative claims based on a new reserve's proximity to an existing reserve.

-?Center on a company that has changed its name, business or trading symbol lately to align it more closely with gold.

The alert also warns investors that even legitimate gold investments are best used as part of a diversified portfolio.

Read more: http://www.azcentral.com/business/articles/20...z22uKD1K71