The Nevada Attorney General's Bureau of Consumer Protection, the Nevada Office of Secretary of State Securities Division, and the U.S. Commodity Futures Trading Commission are advising consumers to be wary of sales pitches regarding commodity futures trading.
Consumers may hear or see an ad, such as the following, on the radio, television, telephone, via email, or over the Internet:
"It won't be long before cold weather is here. Heating oil inventories are down and demand is going up. There are warnings about shortages already. Get the facts on how $5,000 properly positioned can return $20,000 or more with just a ten cent move in heating oil prices. Past performances is not indicative of future results and people can lose money. Low supplies and high demand equal higher prices. Get the strategies now by calling 1-800-xxx-xxxx. $5,000 can return $20,000 or more, but timing and strategy is the key."
Claims that the risk of purchasing commodity futures and options can be predetermined or fixed are misleading. Purchasers of commodity option contracts can actually lose their total investment. Futures investors can also lose more than their investments because futures contracts are "leveraged" or "margined."
In some instances, the company that has produced a television or radio advertisement is not registered to offer to sell commodity futures or options, but instead will sell your name to brokers who will then make similar claims in a telephone sales pitch.
If you are solicited by a company that claims to trade commodities and asks you to commit funds for those purposes, consider the following tips:
-- Avoid a company that predicts or guarantees large profits because of predictable seasonal changes in demand, published reports, or well-known current events.
-- Stay away from companies that promise little or no financial risk.
-- Be wary of high-pressure efforts to convince you to send or transfer cash immediately to the firm, via overnight shipping companies, the internet, by mail, or otherwise.
-- Be skeptical about unsolicited phone calls about investments, especially those from out-of-state, salespersons or companies with which you are unfamiliar.
-- Prior to trading, contact the Nevada Secretary of State, Securities Division, CFTA, Better Business Bureaus and the National Futures Assoc.
-- Be sure to get information about the company and its track record before you invest. Check the company's materials with someone whose financial advice you trust.
-- Do not deal with individuals who will not give you their background.
-- If in doubt, do not invest.
Persons who believe they are victims of commodity futures fraud should contact the Secretary of State, Securities Division, in Las Vegas at (702) 486-2440.
