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Regulators
hunting ways to stem on-line investment fraud
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| Source: The Fort Worth Star-Telegram, Securities and
Exchange Commission WASHINGTON - It may be easy to invest in stocks on the Internet; it can also be very dangerous. Con artists are using the Internet to give old investment scams new high-tech twists, and regulators are challenged by the mushrooming problem. The Securities and Exchange Commission is receiving 200 to 300 complaints from online investors each day, up from just a handful two years ago. Securities frauds have moved from the boiler rooms of yesterday to the Internet chat rooms of today, said Sen. Susan Collins, R-Maine, chairwoman of the Senate Subcommittee on Investigations, which held hearings on Internet fraud this week. Regulators said they believe that fraud will continue to multiply as the Internet continues its rapid growth. But there is little consensus on what can be done to fight it. The Clinton administration is expected to make some preliminary proposals within a few days. For some investors, the Internet has been a blessing. The technology has made trading faster and less expensive for many. Because of these benefits, about 37 percent of individual investors trades are now done online, up from virtually none in 1995. And the number of online brokerage accounts is expected to triple to 14 million by 2002, the SEC predicts. But the same technology that helps consumers also increases the possibility of online fraud, because money changes hands so quickly it is often hard to regulate. The SEC has gone after 66 cases of Internet fraud since 1995 - most within the past year. The SEC has identified three common types of Internet scams: Fraud. Providing false or misleading information about a companys business prospects or assets to potential investors. Market manipulation. Driving up a stocks price with selective purchases, urging small investors to buy and then selling at an inflated price before small investors can get out. Touting. Passing off information and analysis about an investment as being the product of objective and independent research rather than disclosing that it comes from an interested party. The SEC uses a cyberforce Internet swat team that includes 125 attorneys, accountants and analysts who surf the Net looking for fraud. FYI or your information Investigate before you invest The Internet has become a venue for many con artists. Here are some ways investors can fend off cyberfraud: Dont believe everything you read online. Take time to investigate the investment opportunity before you hand over your money. Dont assume the investment is approved or screened. Anyone can set up a Web site or advertise online without government approval and often without any check of its legitimacy or truthfulness. Dont buy thinly traded, little-known stocks strictly on the basis of on-line hype. Ask yourself - if its such a great money-making idea, why is someone telling 100,000 of his closest friends about it on the Internet? Dont invest based on the advice of someone who hides his or her identity. Always check with the Securities and Exchange Commission or state regulators. Ask if they have received any complaints about the company, its managers or the promoter. |