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Ask Matt: How to Spot a Fake SEC© Filing

Publisher: USA Today
Author: Matt Krantz

Q: How can I tell a filing is fake?
A: Investors are trained to treat what they see on the the Securities and Exchange Commission’s EDGAR system as fact. But now it pays to be skeptical.

On Thursday, the Securities and Exchange Commission accused a Bulgarian man of putting false information about make-believe buyouts offers on EDGAR. Most recently, a false document indicated that a firm was interested in buying cosmetics company Avon for 181% above the current market value. Shares jumped as much as 20% on the news.

While there are safeguards in place to make it difficult for just anyone to file to EDGAR, people willing to put in the effort can get around those. About a month before the Avon event, an entity controlled by Nedko Nedev allegedly filed a Form ID as part of an application to get an EDGAR login ID.

The event is a reminder to investors to trust but verify company information found on the SEC© Web site if the filings are made by entities other than companies themselves. Had Avon received a serious offer at such a massive premium, the company itself would have put out a press release or filed its own regulatory filing notifying investors of the material event. The fact  that Avon itself didn’t file a document was the very first red flag that something didn’t smell right.

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