In last week’s column I referred to a computer glitch that led to incorrect pricing on a widely held investment, and the potential for investors to react too swiftly without properly evaluating the situation. After feedback from some readers I decided to give more details on what actually happened, as the cause of the glitch brings up a concern investors should be aware of.
Occasionally, investors may receive solicitations from individuals who are interested in buying one of their investments. Just as you might receive a letter in the mail offering to buy your house for cash, you may also receive offers to buy items held in your investment portfolio. Although most people are naturally suspicious of unsolicited cash offers for their home, there is nothing illegal or inherently wrong with a legitimate offer to buy something that you own. Each party is free to negotiate a deal or walk away.
When similar types of offers are made to investors, great care should be taken to evaluate them. Some offers may be in the best interests of the investor while others may include an offer price well below what the investment is actually worth. The latter usually comes on very official looking letterhead and sometimes they are confused as having come from a known or trusted source. It may also include a negative portrayal of the investment to encourage acceptance of the offer.
Though unsolicited buyout offers for various investments are common, and can be a legitimate business tool, they sadly may also be an attempt to take advantage of an unsuspecting investor. In cases where the offer is below, or far below current market value, the offeror may simply be fishing for someone who might accept or sign the offer without properly reviewing it.
The computer glitch of which I spoke last week occurred when an individual somewhere accepted such an offer at a price far below the then current asset value of the investment. A computer picked up the transaction and assumed the price had dropped dramatically and thus changed the price across the board. There was a moment of panic I am sure, until it was realized what had happened and the price was corrected.
The world is full of people who would love to separate you from your money. Sometimes they use outright fraud and at other times they hide among legitimate business practices to avoid detection. Sending you an offer in the mail to buy one of your investments at below market value may be deceptive but if done according to regulations, it is completely legal. For your own protection you should thoroughly research any offer and never sign anything until you are satisfied it is in your best interests. If you have a financial advisor, always speak to them directly before signing anything, even if it appears to have come from them.
Hi, I'm Dan. I'm a CFP® Professional.
Securities and advisory services offered through Commonwealth Financial Network®.
Member www.finra.org / www.sipc.org , a Registered Investment Advisor. Wyson Financial, 1173 S. 250 W. Suite 505, St. George, UT 84770.
This communication is strictly intended for individuals residing in the states of AZ,CA,CO,DC,FL,HI,ID,IL,KS,KY,MA,MI,MN,MO,MT,NE,NM,NV,OH,OR,SD,TX,UT,VA,WA,WY. No offers may be made or accepted from any resident outside these states due to various state regulations and registration requirements regarding investment products and services.