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Account takeover (ATO) fraud occurs when a bad actor gains unauthorized entry to an investor’s account, which enables them to conduct fraudulent financial transactions. They will often use compromised security information (e.g., logins and passwords) to access bank and brokerage accounts for the purpose of conducting illegal funds transfers, retail purchases, and trading activity. 

One of the best ways to build wealth is by saving and investing over a long period of time. The earlier you start, the easier it is for your money to grow. Opening your first investment account is a key step in beginning your investment journey. Here are some important investment tips from the North Dakota Securities Department to consider when opening any investment account.

With advances in technology including more enhanced digital experiences that blur the line between the physical and digital worlds, the future has arrived in the form of the “metaverse.” A series of virtual worlds, the metaverse is the latest technology that offers new ways to interact and collaborate, and with that, new ways to perpetrate financial scams and investment fraud. This alert highlights some current metaverse investment scams and provides tips for investors to protect themselves.

With stock market volatility dominating Main Street news headlines since early 2020, interest in investing has seen a dramatic increase. According to Bloomberg News, downloads of investment apps rose by 20% in 2021 from the year prior while actual time spent on these apps jumped by 90%. Most Millennials and Gen Z-ers are using social media sources for information about investing rather than relying on more traditional sources of investing information such as brokerage or investment advisory firms, or regulatory agencies.

Influencers have taken notice, and social media has become more saturated with financial content than ever before, leading to the rise of the financial influencer, or “finfluencer.” Viral videos claiming that an investment opportunity will “go to the moon this year!” have proliferated, as have social media postings promoting easy plans for paying off your house, car, or student loan debt using language such as “Five easy tricks to financial freedom.”

This investor advisory explains what financial influencers are, how they are compensated, what you should keep in mind when you are exposed to financial influencers’ content, red flags to watch out for, and resources available to you.

Promissory notes can be appropriate investments for certain investors. However, promissory notes that are sold broadly to individual investors are often scams and are a leading source of investor complaints received by securities regulators.

A private placement is a securities offering that is not required by law to be registered with federal or state securities regulators. Private placements allow companies to sell stocks, bonds, or other securities to investors without completing the rigorous disclosures necessary in a registered offering.

With interest rates on the rise, more investors may be considering an investment in bonds or bond funds, and in researching alternatives or talking to a financial adviser, may have come across bond credit ratings.  Credit ratings usually appear in the form of alphabetical letter grades (for example, ‘AAA’ and ‘BBB’) and are an estimate of the relative level of credit risk of a bond, company or government.  Credit ratings are issued by third parties and are not an assessment by the issuer of the bond or by securities regulators.

Credit ratings can be useful when evaluating an investment.  But when considering credit ratings, you should understand their limitations.  You should not base your investment decision solely on a credit rating or treat a credit rating as if it were investment advice.
 

In recognition of World Elder Abuse Awareness Day on June 15, the North Dakota Securities Department reminds financial professionals and the public throughout North Dakota to be on the lookout for signs of elder financial abuse.

Governor Burgum Issues Proclamation Recognizing World Elder Abuse Awareness Day on June 15.

Many investors are becoming more conscious of whether a company in which they are investing has considered environmental, social and governance (ESG) factors. This is resulting in an investor-driven push to get corporate managers to pay greater attention to ESG issues. Some corporations are responding by altering their management philosophies and business plans.