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Energy related investment fraud on state regulator's radar

In the North American Securities Administrators Association’s (NASAA) most recent enforcement report, oil and gas investments were the fourth most common product involved in state securities enforcement cases, with nearly 40% of responding jurisdictions reporting energy-related faud cases.

“Many of these investments are highly risky and illiquid and therefore are not appropriate for many investors,” said Heath Abshure, NASAA President and Arkansas Securities Commissioner. “It is not unusual for unscrupulous promoters to use the lure of current events or innovative technologies to take advantage of unsuspecting investors by engaging in fraudulent practices.”  Abshure said promoters sometimes prey on investors interested in socially responsible products by labeling them as “green energy” investment opportunities. The phrase “green energy” implies that the products are ecologically friendly. In some cases, the promoters may be operating a fraudulent shell company and not producing anything.

Energy-related investments can take many forms: as a private placement purchased through a subscription agreement, a limited or general partnership, or as a joint venture. Issues are also offered as common stocks, bonds and ETFs.