"Nah, You Can't Lose; But Just in Case:If you're among the penny-
stock gamblers messing with the goofy new ''minute-trading''
game, you won't be the least bit interested in reading this.
New York, April 20 (Bloomberg) -- If you're among the penny-
stock gamblers messing with the goofy new ''minute-trading''
game, you won't be the least bit interested in reading this.
But clipping and saving wouldn't hurt. Because you may not
care about your (albeit skimpy) legal rights during these easy-
money days. But there's a good chance you'll be interested in
blaming someone other than yourself on the inevitable day when
wins turn consistently to losses.
Minute-traders are a new breed of misguided investors -- if
the word can be used so loosely -- who divine their next trading
move by watching for tips on the World Wide Web. The dozens of
Web pages that offer ''minute-trade'' services basically work
like this: an unnamed author who claims to be neither broker nor
investment adviser puts up a Web page to tout companies whose
stocks trade at less than $5 a share.
The touts, which typically are published on a particular day
of the week at a particular time, often are talked up in advance
on popular Internet sites. The authors reserve the right to load
up on the stocks before they recommend them, and to dump the
shares right into the rally they triggered.
Right now, investors who play the game presumably are
winning often enough not to grouse -- scary routs in Internet
stocks notwithstanding. Minute-trade pages boast of returns of as
much as 1,300 percent in a matter of hours, and, with profits
like that, who needs a lawyer?
The problem is, when you look for a lawyer once your minute-
trades are all losers, you may not be able to get one.
Brain-Dead
For even aggressive plaintiffs' lawyers, it appears, are
reticent about making a case on behalf of investors dumb enough
to take the advice of an anonymous person who touts stocks of the
riskiest shares around. Most of all, they say that disclosures on
the pages so clearly describe the conflicts of interest ''that
these investors have to be a little brain-dead to go online and
do this,'' says Theodore Eppenstein, a New York lawyer.
''I almost certainly would not take a case like that,'' says
Tom Grady, an otherwise aggressive advocate of investors who lose
money because of questionable advice. Adds Mark Maddox, a
plaintiffs' lawyer in Indianapolis, ''What they're doing is no
different than if I went out and bought a lottery ticket or
played a Black Jack table. I have very little sympathy for the
'investors,' though I have a lot of disdain for the people
manipulating them.''
Who Get Sued?
In any case, minute-trade operators will be tough to locate,
and deep pockets will be hard to find, plaintiffs' lawyers say.
''It's too difficult to run people like this down, shake them out
and collect the money,'' says Allan Fedor, a Largo, Florida,
lawyer. Maddox adds that there isn't even a broker to sue, since
investors typically are acting alone and using an online account
to execute trades.
Jonathan Kord Lagemann, usually an advocate for the
aggrieved investor, says cagey minute-page authors might even
make a case that the investors who followed their advice were co-
conspirators who chose to get involved in a manipulated market.
''The clients are trying to pull a scam too,'' he said. ''With
the disclosure you're describing, I wouldn't take the case for
the investor -- but I'd defend it.''
The fact that minute-page operators are pushing their stocks
on the Internet adds another tricky problem, says Matthew Nestor,
director of enforcement at the Massachusetts Division of
Securities: ''How do you get a forum for your grievance -- where
are you going to sue if they're running the page from Denmark?''
Chinks
While most lawyers interviewed for this story gave the
''gimmeabreak'' response to whether they'd bother to sue a minute-
trade page, a vocal minority said the minute-pagers haven't
necessarily covered every angle.
While they admit that they can buy stocks, tout them and
then sell into the rallies they prompt, minute-page authors may
still fall short of regulatory standards, said John Coffee,
professor of law at Columbia Law School.
''If they're telling you only that they might buy, it's not
disclosure if they have bought,'' he explained. ''But if they say
'We bought 10,000 shares yesterday and recommend you do also,'
that's probably full disclosure.''
Web page operators might be charged with ''scalping,'' which
is the failure to disclose ''a large short-term economic
interest'' in the stock being touted, Coffee said. The famous
radio commentator Walter Winchell scalped when he pushed stocks
over the air that he already had in his portfolio, Coffee said.
Class-Action
Coffee says the most promising legal prospect for investors
peeved over minute-trading losses would be to seek other losers
and file a class action suit.
Jonathan Alpert, a lawyer who has frequently hit stock
scamsters with class-action suits, says not only would he work to
locate a minute-page author, he'd also go after the Internet
service provider who let a manipulative page stay in operation.
''You can't just put something out there and walk away from it,''
he says. ''I'm going to start looking at the Internet providers,
because they have some responsibility not to host this kind of
thing, just as a newspaper has responsibility to have appropriate
advertising.''
Alpert says that Internet service providers who choose to
make any editorial decisions -- such as policing for pornography,
or for users who run advertising on provider pages where that is
forbidden -- hold themselves open to liability because they can't
subsequently say they are only editors of certain content.
Still, even among the feistiest of plaintiffs' lawyers,
there's no outrage over the bad fortune of speculators who get
taken for a ride by minute-page touts.
Best advice from Fedor: ''Don't do it in the first place.'' |
