INVESTING BASED ON INTERNET TIPS CAN BE HAZARDOUS
TO YOUR FINANCIAL HEALTH, SAY STATE SECURITIES REGULATORS
-Analysis Finds 40% of "Spam" Touts Risky Over-the-Counter Stocks-
WASHINGTON (December 21, 1998) - Investing based on tips you find in your e-mail box can lead to a bear of a stock portfolio, according to an analysis done by a group that represents state securities regulators.
The North American Securities Administrators Association analyzed 1,000 unsolicited e-mail messages forwarded by investors to the group's new e-mail address, cyberfraud@nasaa.org. Roughly 40 percent of the e-mails were securities related; a similar percentage involved business opportunities; the rest included credit and loan pitches, gambling/casino web sites, herbal and other health treatments and "cures" and sex-related topics.
For stock fraudsters, the Internet has become an alternative distribution channel, state regulators say. Reaching people via e-mail is more efficient and much cheaper than contacting them the old fashioned way, through telephone boiler rooms, where high-pressure sales people sit shoulder to shoulder reading from elaborate scripts.
The vast majority of the securities-related e-mails, received from October 5 to November 12, promoted eight over-the-counter stocks. In one case, investors were urged to buy shares in a company that supposedly had developed a solution to "Y2K problems 100% of the time." The e-mails NASAA received invariably contained bullish, if not far-fetched, predictions such as a restaurant chain whose revenues were projected to grow 300% for the 97-98 fiscal year. In another case, a Web site promoting low-priced over-the-counter stocks claimed that "with 1.2 million visitors per day starting within the next few days, there's NO CHANCE the stocks can't rise!!!"
Investors who put their trust in this "spam" would have ended up with a bear of a portfolio, NASAA found. In an analysis of the eight stocks, none had reached the price projections claimed in the "spam." In fact, six of the eight securities were trading below their recommended purchase prices. Projections were so bullish that stock prices would have had to quadruple on average to meet their targeted prices. The eight stocks were also highly volatile, gyrating up and down by more than 20% in a single day.
Investors logging on for stock tips should be very wary about what they find, NASAA cautions. "Investors should treat junk e-mail with at least as much-if not even more-skepticism as junk mail or a cold call from a stock broker," warned NASAA's Executive Director Philip A. Feigin. "It's worthless, you can't even recycle it to save a tree somewhere."
The e-mail analysis was done as part of Investment Opportunity Surf Day (November 12), a joint regulatory effort by state securities regulators, the Federal Trade Commission, the National Association of Securities Dealers and the Commodity Futures Trading Commission.
NASAA encourages investors to forward suspicious securities-related e-mail they receive to NASAA and to include the state in which they live so the "spam" can be sent on to the appropriate state regulator. So far NASAA has forwarded e-mail to regulators in 26 states, from Arizona to Wisconsin.
If investors are tempted to act on Internet stock tips, they should always check with their state securities regulator to make sure the investment is registered in their state. The addresses and phone numbers of the state securities regulators are available on the NASAA web site, www.nasaa.org, or by calling (202) 737-0900.
nasaa.org |
