Check out this WSJ article mentioning Rambus. Very, very funny.
I've boldfaced a particularly interesting comment at the bottom. <ggg>
SEC Wins Applause For Stepping Up Web Stk Fraud
Enforcement
By Johanna Bennett
NEW YORK (Dow Jones)--When Sharon Wagner heard Wednesday that the SEC charged
almost four dozen people and companies with Internet stock fraud, she had one wish.
"I hope it puts the fear of God into online crooks," said the 47-year-old online investor.
She isn't alone.
From the headquarters of a small computer company to the message boards on Yahoo!
Finance, the SEC's announcement Wednesday regarding a series of lawsuits against 44
companies and people suspected of Internet stock fraud was met with seemingly universal
approval.
"I think it is great that they are cracking down. There is certainly a sleazy element involved," said
Gary Harmon, chief financial officer for Rambus Inc. (RMBS), a small computer company that
saw its stock price soar and plunge two years ago possibly from remarks by participants on Web
chat rooms.
The 23 lawsuits filed by the SEC this week - detailed in an announcement Wednesday -
constitute the first coordinated strike against Internet stock fraud and touch on cases involving
everything from paid stock promoters to message board postings to Internet stock newsletters.
For many in the industry, the announcement was seen as a warning to scam artists. But John
Stark, head of the SEC's Office of Internet Enforcement, insisted it was intended as much to
reassure Internet users as to deter fraud.
"It is supposed to be a message more than a warning," said Stark. "This is a strong statement by
the SEC that we are going to do everything we can .... We want to send a real message to users
and investors that we are going to be policing the Internet vigorously."
For the better part of two years, the SEC and other regulatory agencies have focused
considerable attention on stock fraud cases involving the Internet. The problem has escalated
over the last five years, as the Web has grown into a popular tool for individual investors.
SEC officials estimate that the agency receives up to 120 complaints a day about reported
scams and schemes that include "pump and dumps," bogus stock deals solicited via e-mail,
attempts to manipulate stocks using Internet message boards and online newsletters secretly
taking payments to promote certain stocks.
As a result, earlier this year the agency created a special unit to handle online investment fraud.
and recruited the efforts of a "cyberforce" of 125 SEC employees who regularly surf the Web
looking for possible fraud.
Now, the SEC plans to be more "programmatic" in its cases, targeting specific areas of fraud,
SEC's Stark said.
"I think what you are going to see that is different is us being more programmatic," Stark said.
"Internet fraud is a misnomer. You have all sort of different scams. You have market
manipulation, pyramid schemes, ponzi schemes...It is up to us to continue to bring cases as
relentlessly as we can but with a little bit more structure."
For some investors, Wednesday's announcement was much awaited.
Less than an hour after SEC officials announced the details of its 23 lawsuits, dozens of
message boards on Yahoo! Finance were peppered with hundreds of postings as participants
spread the news and discussed the allegations.
"Good work SEC. Finally my taxes are going for something besides protecting Kangaroo rats,"
said "camcoiam," a participant on Yahoo! Corp.'s (YHOO) Yahoo! Finance.
For investors, Internet fraud, which often targets small companies with thinly traded securities,
has cost untold millions in lost investments. Meanwhile, the financial Web sites catering to
investors have often had to live under a cloud of suspicion.
Message boards are frequently criticized as being a haven for misinformation, as well as
"hypsters" intent on pumping up stock prices for self-gain.
"We welcome it (the SEC's action)," said Mark Peterson, spokesman for Go2net Inc. (GNET), the
owner of Silicon Investor, a popular message board Web site for investors. "We think there is a
lot of unfair speculation going on out there. We recognize the value of a good vigorous
discussion forum. But we also realize there are people abusing it. People need to be protected."
Several message board sites have compliance departments where users can e-mail complaints
about other participants. But most message board and chat room operators would rather have
the SEC to determine if a member is engaged in fraud.
But corporate officials insist that even with the utmost diligence by the SEC, not every problem
will disappear.
Henry Carter, vice-president of compliance for E-Trade Group Inc. (EGRP), said that the SEC's
list of lawsuits appeared to center largely on paid stock promoters. But not everyone trying to
pump up stock prices are paid for the effort, he added.
"The SEC has gone after the most in your face fraud. But there is a whole other universe of
(message board) messages," Carter said.
Meanwhile, the SEC can do little about uninformed investors who unintentionally spread
incorrect information that ends up affecting a company's stock price, according to Rambus'
Harmon.
"I think it is good knowing that the SEC is going to do something about the sleazy element. But I
don't know if they can do much about the people out there who are spreading rumors, not for
their own gain," said Rambus' Harmon. "I'm not talking about the sleaze bags who have major
investments who are trying to spread rumors to increase the value of their stock. I am talking
about the people who just like to chat." |
