Department of Financial Institutions
DFI Warns of Oil and Gas Investment Fraud
FRANKFORT, KY (March 4, 2009) – It doesn’t take a multi-billion-dollar scheme to ruin the retirement assets of Kentucky investors. The Kentucky Department of Financial Institutions (DFI) is continually combating Ponzi schemes and other investment fraud – particularly under the guise of oil and gas investments.
That’s why DFI is joining national consumer organizations and government agencies in the 11th annual National Consumer Protection Week, March 1-7. DFI is bringing awareness about fraud – especially oil and gas investment fraud – to help people protect their money.
DFI licenses and registers individuals selling securities from Kentucky offices, including the companies that sell shares in drilling operations. Southern Kentucky in particular is known for oil deposits in shallow wells, and there are many oil and gas operators in the state – although not all of them are legitimate.
DFI is responsible for protecting Kentucky investors, including citizens who have been contacted by an out-of-state company that sells shares in oil wells. In fact, it’s common for unscrupulous companies to contact victims in areas that are far away from the drilling site.
While some oil and gas investment opportunities are legitimate, many are fraudulent. Con artists frequently provide false information. Because it can be difficult to tell which securities offers are fraudulent, it is important to check with a regulator to make sure the products and the person selling them are licensed/registered and that no complaints have been filed.
You can check with the regulator both where you live and where the seller is located. In Kentucky, call DFI at 800-223-2579. For a map of regulator contacts in other states, visit www.nasaa.org/QuickLinks/ContactYourRegulator.cfm.
“Unfortunately, investment fraud has escalated during this economic downturn,” said DFI Commissioner Charles Vice. “You can stop con artists in their tracks by verifying their claims. Read the paperwork, verify their license and understand the investment before buying. If anything seems suspicious, report it to a regulatory agency immediately.”
DFI provides an oil and gas investor checklist online at www.kfi.ky.gov/public/invest.htm. Oil and gas investments can take many forms and are often complex. It’s important to ask detailed questions when considering such an investment, and DFI’s checklist can provide a start. As an alternative, a licensed broker may help you invest in oil exploration and producing companies which are well-established and listed on the New York Stock Exchange.
Additional online resources can assist investors with their decisions:
DFI is an agency in the Public Protection Cabinet. It supervises the financial services industry by examining, chartering, licensing and registering various financial institutions, securities firms and professionals operating in Kentucky. DFI’s mission is to serve Kentucky residents by maintaining a stable financial industry, continuing effective and efficient regulatory oversight, promoting consumer confidence, and encouraging economic opportunities. DFI works to stop fraudulent investment schemes through civil court action and joint investigations with federal and state agencies.