The Securities and Exchange
Commission will soon begin a hiring spree for its enforcement
division as it zeros in on Internet fraud, which is becoming a
"burgeoning problem", a top SEC official said on Friday.
The securities regulator is slated to add as many as 50 to
60 people to its 850-person staff of investigators, lawyers and
accountants, said Richard Walker, director of the SEC's
enforcement division.
"One of the amazing things about the Internet is it changes
so rapidly," he told a Washington, D.C. Bar luncheon. "There
may still be the same scams, but they have new twists that are
particularly unique to the Internet."
About 325 of the staff are based in the Washington
headquarters while the other 525 are anchored in 11 regional
offices spread across the United States.
In comparison to its relatively small staff, there are
8,500 broker-dealers, 63,000 branch offices of brokerage firms,
and 556,000 registered representatives, Walker said.
The securities regulator's greater attention on the
Internet comes amid an explosion of financial information on
the Internet and at a time when discussions about particular
stocks has become a new pastime.
SEC Chairman Arthur Levitt told Reuters in an interview
earlier this week that rooting out Internet scams was a "top
priority" for his agency. He urged the U.S. Congress to provide
additional funds to help stem the flow of its staff to the
private sector, where salaries are much higher.
Walker said the agency was particularly worried about
momentum sites, where a particular stock is highlighted and
investors are urged to buy it at an appointed time in an
attempt to build momentum and push the price higher.
"It's a new, speedier kind of manipulation than in the
past," Walker said. "You can achieve a manipulation with the
snap of your fingers by reaching large numbers of people very
very quickly and artificially adding to the price of a
security."
Additionally, the SEC is targeting fraud at Internet sites
and chat rooms, primarily those that charge membership fees
that promote particular stocks and are not being forthcoming
about compensation received for highlighting it or selling
while urging others to buy.
"It's sort of like an investment newsletter on steroids,"
Walker said.
Last week the SEC filed fraud charges against a New York
resident, who runs an Internet site called Tokyo Joe's Societe
Anonyme, for allegedly selling stocks while promoting others to
buy, misleading his membership about his past performance, and
failing to disclose compensation for touting stocks.
The SEC is also targeting impostors, such as instances of
posting false messages about a company in an attempt to boost a
stock, Walker said.
Additionally, to help guide companies as they utilize the
Internet as an information resource, the SEC is considering
issuing a concept release soon on the responsibility for
content of web sites, Walker said.
((Reuters SEC Desk, 202-898-8399))
REUTERS
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