Investors Should Move Cautiously on Information Highway : Computers: Scam artists are proliferating on electronic services. Other users are well-intentioned but just don’t know what they’re talking about when touting stocks.
“Caution: Bad advice ahead. Proceed slowly and at your own discretion.”
If the information highway was a real highway, with transportation department officials posting protective road signs at all the on-ramps, there would be one like that at the entrance to Prodigy, CompuServe, America Online, Internet and all the other computer bulletin board systems where investors congregate.
Investment scams, stock manipulations and illegal promotions abound on on-line investment bulletin boards, says the National Assn. of State Securities Administrators. And that doesn’t even count the many well-intentioned investors who trade tips freely but don’t have any idea what they are talking about.
What’s good about the on-line world also presents serious risks. Anyone with a computer and modem can send a message that hundreds of thousands of people will read. And the feel of the on-line world conveys a certain strength of conviction.
On-line communicators, unable to convey subtleties with an inflection of the voice or the raise of an eyebrow, tend to remove all the verbal qualifiers we throw into our speech and strengthen their on-line language. A good stock becomes a can’t-miss opportunity. An investment hobbyist becomes a fee-charging mutual fund adviser.
Here are just some of the scams that have gone on-line, according to Craig Goettsch, president of the securities administrators group and superintendent of the Iowa Securities Bureau.
A San Antonio-based ring promoted an illegal electronic-mail chain letter promising people that if they sent $1 to each of five people on an on-line list, they could earn $60,000 in just three to six weeks.
A stockbroker unlicensed to do business in Missouri touted his own services and made dubious claims for stocks not registered for sale in the state.
An Austin, Tex., man invested $10,000 with an out-of-state correspondent who called himself a skilled money manager but who, in fact, was not licensed as a stockbroker or investment adviser and who pocketed the money.
A ring of 20 individuals manipulated prices on stocks they owned, dumping them after on-line hype pushed the prices up to levels that proved profitable to the scam artists.
Investment schemes now flourish on commercial bulletin boards, says Goettsch. The most prevalent involve manipulation of obscure, thinly traded stocks (one user can sign on with different names and make it appear there’s a broad-based rush into a stock); misconduct by phony and unlicensed brokers and advisers; undisclosed interests of promoters who may be paid to push a product; and the promotion of exotic scams like gold mines, pyramid schemes and ostrich farms that are also promoted by phone and mail.
What’s a high-tech investor to do?
Don’t give up the on-line world. It still remains a marvelous place to get quick quotes and research, perform trades and talk with others who have serious interests.
Just take all the information with a tremendous grain of salt and constantly remind yourself that you’re taking advice from people you don’t know.
And avoid the stupid: no investing by mail with a company you haven’t checked out, no buying stocks you haven’t researched yourself, no assuming that your on-line compatriots have your interests at heart and no conflicted ones of their own, and--most obviously--no sending away $5 and expecting to get $60,000.
Just to show that all on-line correspondence isn’t bad, you can reach the National Assn. of State Securities Administrators at: nasaa@holonet.net.
