FINRA last week posted a warning about scams that purport to offer investors' access to pre-IPO shares of well-known social media companies, including Facebook.  Investors are being offered privately-held shares of these high-profile companies.

    FINRA Publication.   In its Investor Alert Pre-IPO Offerings - These Scammers Are Not Your Friends, FINRA explains that, while a company can sell its unregistered shares in private transactions - i.e., "private placements" - these investments can be fraught with risk and are typically open to a select group of investors who meet certain income or asset thresholds.

Most pre-IPO offerings are legitimate, but the recent ones related to social media companies are not.  The SEC recently settled a civil action against a self-employed securities trader who allegedly defrauded over 50 U.S. and foreign investors out of nearly $10mn in a series of pre-IPO scams involving purported shares of Google, Facebook and other well-known companies.

"Investors might think they are getting in on the ground floor of innovative social media companies, but instead find that they may have handed over real money for non-existent shares. Any investor who receives an unsolicited offer to invest in a pre-IPO company should walk away."  -- John Gannon, FINRA SVP for Investor Education.

How Investors Can Identify Fraudulent Offerings.   Pre-IPO Offerings helps investors separate legitimate private placements from pre-IPO scams by:

• Avoiding any unsolicited pre-IPO offer.  Investors should ask themselves, "Why would a total stranger tell me about a really great investment opportunity?"
• Being alert to persuasion tactics.  Virtually all pre-IPO scams rely on the same recipe for a con: dangling the prospect of exclusive access to eye-popping returns at a discount if you act quickly.
• Verifying seller's credentials.  The person touting the stock or investment should be licensed.
• Determining if you're being conned.   A convicted criminal can be ID'd by using the Federal Bureau of Prisons Inmate Locator.
• Using search engines.   To learn as much as you can about a solicitation and those behind it.
• Getting an unbiased second opinion.  Seek out a licensed investment professional or an attorney.

FINRA asks investors who believe they've been defrauded, or treated unfairly by a securities professional or firm, to file a complaint.   For further details, go to:   [FINRA News Release, 3/15]