Consumers are likely to see more bogus oil-and-gas investment deals looking to capitalize on the rising price of oil, the state’s top securities regulator says.
As gasoline prices move higher, fueled by similarly priced barrels of oil, investment opportunities — some legitimate, some not — tend to crop up more frequently, said Colorado Securities Commissioner Fred Joseph.
“We’re already starting to see them with several cases we’re already investigating,” Joseph said. “You simply don’t see Exxon calling for a $50,000 investment, but you’ll hear from these individuals selling their opportunity at dinnertime.”
The trend is likely to mimic one that occurred in 2007 and 2008, Joseph said, when oil prices climbed steadily toward $140 per barrel before nose-diving again. Oil closed at $112 per barrel Monday.
“Back in 2008, we had dozens of oil-and-gas investigations, most for selling unregistered securities,” Joseph said.
Investments in oil-drilling operations need to be registered with the state securities commission and require a broker’s license if the company is not located in Colorado or if the salesman is working for a different company.
Companies selling their own investment opportunities, although still required to be registered, do not have to be licensed to sell.
The first of what Joseph expects to be a summer full of cases if oil prices continue to rise went public April 11. Dallas-based The Mieka Corp. was slapped with sanctions for allegedly violating state rules requiring registration and licensing.
The company cold-called a securities-division inspector to offer an investment chance at prospective oil wells in Pennsylvania.
Joseph said consumers can protect themselves by asking anyone who is making an investment pitch for oil or gas companies to provide license and registration information that can be verified.
Although many company pitches are legitimate, some are not. It is difficult for a consumer to distinguish between the two right away.
“They tend not to disclose that their last 80 wells have been dry holes,” Joseph said. “If they’re registered, it will disclose the risks, too.”
David Migoya: 303-954-1506 or dmigoya@denverpost.com
