The world is witnessing the 4th Industrial Revolution – bolstered by advancements in AI, cloud computing, blockchain, and more. With smart investments, this is an opportune moment for growing assets. There are new ventures, and some also deliver better yields. However, the probability of loss or a fraudulent company can never be eliminated. Protecting the investors is crucial for trading, and the US government is known to be taking decisive measures to ensure the same. On 6th October, SEC Chairman Gary Gensler used his Twitter handle to promote the state-run website Investor.gov as an attempt to encourage investor awareness.
World Investor Week: Investor Awareness Programs
The World Investor Week occurs between the 4th and 10th of October. Security regulation boards from six continents convene with different activities and campaigns for promoting investor education and awareness. For the 2021 session, the 33rd Chair of the US-SEC mentioned highlighted the campaign’s needs, along with the benefits of the Investor.gov website. The state-sponsored website is rich in investment-related information and resources. Business news and other informational articles/blog posts are regularly aiming to help both seasoned investors and newcomers. As a World Investor Week Special, there is also an investment-related quiz.
Investor.gov contains several tools to help the investor detect fraud. To start things off, there is a search toolbox for verifying investment professionals or firms, complete with CRD numbers and FINRA reports. Other tools within the website include an MDC (Minimum Distribution Calculator) and a CI Calculator. The former helps in determining the right retirement fund withdrawals, while the latter presents projected investment growth through compound interest. Need something else? Look out for the additional finance planning tools at the bottom.
With the multitude of investment products available in the market, it is often confusing to find the right investment product. New entrants may have difficulty in understanding a wide variety of things such as requisite fees, Initial Coin Offerings(ICOs), fraud red flag detectors, and more. The website acts as a useful research and resource tool for clearing these queries. It also provides assistance, guidance and includes a question/complaints section.
World Investor Week 2021 Bulletin: Latest Updates
The SEC along with CFTC, FINRA, NFA, and the NASAA issued the Investor Bulletin to put the spotlight on investor awareness, education, and protection. As part of a global campaign, professionals associated with investment and trading are encouraged to educate others. Key topics which are perceived as current objectives by the SEC include :
Environmental, Social, and Governance(ESG) investments are gaining prominence with each passing day. The term “ESG investing” has already become popular in investment circles among finance professionals, informational investment websites. Also known as sustainable or impact investing, ESG investments allow investors to be socially responsible. Options selected for the ESG investment include companies that promise to commit to at least one of the three factors of environment, social, or governance. Mutual funds or exchange-traded funds often implement ESG elements in their investment portfolios. In a recent article, the SEC warned investors to look out for investment scams stemming from the devastating Hurricane Ida. Disasters are often capitalized by fraudsters to lure investors into classic Ponzi Schemes as well as pump-and-dump scams.
Cryptocurrencies and Digital Assets
Financial technologies based on decentralized blockchain technology are nowadays implemented worldwide. As such, trading in digital assets is becoming increasingly popular. As a new option, crypto markets are highly volatile- capable of scaling huge highs and lows within a short period. By nature, they may be securities, derivatives, or even cash commodities. The bulletin recommends investors trust and work only with registered finance institutions or professionals. Trustworthy trading options are registered with the National Futures Association(NFA), Financial Industry Regulatory Authority(FINRA), or the SEC.
According to FINRA, day trading refers to buying and selling or selling and buying the same security within the same day. This practice, common among day traders, often helps in increasing gains or earning quick profits. Trade options also include short-selling equities, commodities, futures, and more. Seasoned retail investors may even choose promoted stocks with lower market capitalization. Day trading is risky, and the chances of incurring losses are high. Thorough research is key to any business. But, blindly acting upon the latest “reliable” trade information cannot guarantee profits every time, especially in the case of day-trading. As the saying goes- all that glitters is not gold.
Special Purpose Acquisition Company(SPAC)
SPAC is a popular transition platform for private companies. It acts as a blank check company and helps in the transformation into publicly traded companies. Companies undergoing such transitions usually have more control over their pricing and other related aspects compared to conventional IPOs. An interesting thing to note is that the SPAC is a shell company at the time of its initial public offering. It does not contain any underlying business, or any assets except cash, limited investments, and capital acquired from the IPO. The SPAC acquisition or merger with a private company may take place after months, or even years.
Investor Awareness and Scam Prevention from Brokerage Impostors
Frauds and scams in investments are neither new nor uncommon. In fact, new variations of scrupulous trade practices arrive each day- duping investors and traders of their assets. Recent trends indicate an increase in cybercrimes. Fraudsters often create fake websites using actual finance professional credentials who are unaware of the misuse of their identities. The SEC issued a warning to investors regarding such trade practices, while FINRA went ahead and presented documents to help investors identify fakes. Some common red flags include wrong spellings, poor grammar, abstract website writeups, or the improper use of investment terminology. According to Investor.gov, another important indicator is the use of a registered finance professional’s name as the domain name itself. Websites in the domain format firstnamesecondnamesurname.com are highly suspicious.
About the SEC
Safeguarding investors from fraud while preserving fair and efficient US securities markets are the main targets of the Securities and Exchange Commission(SEC). It is the governing body that regulates and maintains US securities and forex trade. Recently, the SEC expanded to include cryptocurrency under its regulation. As per the latest updates, the Commission plans to implement corporate governance rules for boosting transparency on two proxy voting aspects. The proposal has been placed out for public comment. An individual can reach out through sec.gov.
The SEC aims to increase investor awareness about the existing finance and trade world. This is especially valuable for beginners looking forward to asset growth through securities, exchange, commodities, or crypto trading. For a newcomer the huge number of trade options in the markets, or choosing the right stock might be too much. Political, worldwide, or business events including company performance may indicate how a stock may fare in the upcoming future. As global environmental and social concerns arise, the SEC Chairman also believes companies should be transparent to investors by providing honest and regular information about the operational impact of their businesses.