NASAA recently posted an alert for investors about energy investments. We have the full alert posted here. The information below comes directly from their report. We share NASAA’s mission to protect investors nationwide.
With energy demands and a desire for energy independence increasing globally, investments in traditional and alternative energy resources are being promoted more often and are becoming attractive to more investors. Some examples include: wind turbines, solar panels, biodiesel, ethanol, coal, oil, gas, hydrogen, wave, geothermal, oil sands, and liquefied natural gas. Many of these investments are highly risky and are usually not appropriate for all investors. It is not unusual for unscrupulous promoters to follow the headlines and take advantage of unsuspecting investors by engaging in fraudulent practices.
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 when in fact the promoters may be operating a fraudulent shell company and not producing anything.
What are the Common Ways Energy Investment Products may be Offered?
- Commodities: The purchase of energy products today in order to make money from price changes in the future.
- Exchange Traded Funds (ETFs): Intended to mirror the performance of a particular energy segment or index. For more information on ETFs, click here.
- Private Placements: Energy investments are often sold through a private placement memorandum purchased through a subscription agreement. For more information, click here.
- Crowdfunding: Energy investments soon may be made available to the general public through an online crowdfunding portal. For more information, click here.
- Limited partnerships: Purchasing membership units in an energy investment partnership where the investors’ liability is limited and the general partner makes all managerial decisions.
- General partnerships: Purchasing membership units in an energy investment partnership where the investors’ liability is not limited and the investor may receive tax benefits from the investment.
- Joint Venture: An investment in a specific project or for a finite period of time sometimes involving fractional interests in energy leases.
- Stock in energy companies: Purchasing stock from a particular company that does business in the energy segment.
- Bonds or secured notes: Purchasing a debt instrument from a particular company that does business in the energy segment.