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Pastimes : Brokerage-Chat Site Securities Fraud: A Lawsuit -- Ignore unavailable to you. Want to Upgrade?

To: CountofMoneyCristo who wrote (2266)	7/25/2003 10:14:29 AM
From: Art Bechhoefer	Respond to of 3143

You bring up several points, and many thanks for that. On the Merrill case, I think it will be appealed. As the lead article in BARRON'S noted a couple of weeks ago, the judge was half right! Paying clients who are misled should automatically have a basis for demanding compensation. But in addition, someone who has an interest in a security, and who gives false information in order to affect the price of that security for his/her own benefit is perpetrating a fraud on the market. The SEC is reluctant to go after most of these guys, but I recall that they went after Jonathon Lebed with a vengeance. He was the 13-year old kid that put up recommendations on Yahoo and other discussion boards for penny stocks, and ended up making thousands of dollars for himself and some of his friends. The SEC pays a little more deference to the big enchiladas. In my view, it's the intent that counts. SEC rules (rarely cited, much less enforced) require that anyone giving advice must state whether he/she has a business interest, directly or indirectly, in the securities under discussion. Going after those who mislead for their own benefit is easier here in New York, where we have what is known as the Martin Act, which Attorney General Spitzer used to go after several investment firms. More broadly, in my view at least, investment firms ought to be held responsible for false advertising if they try to manipulate securities prices by issuing false, deceptive or misleading information about the securities. All this may change if Congress succeeds in passing legislation limiting the actions that states can take against these guys, and reserving all enforcement to the do-nothing federal regulatory agencies. Art