is a great tool for everyone, including investors, due to the response
speed and the amount of information that is exchanged. Transactions
are executed very quickly with just the simple click of a button
or a few keystrokes.
However, the Internet is also another avenue for fraud.
Investors must use caution and common sense when using the Internet for securities activities.
The fact that information appears on the Internet does not render additional credibility to the
information. Be especially wary if the source is not identified.
Over the Internet, investors can purchase securities of a company directly from the company.
Treat the online transaction as you would a regular investment, and make sure that the securities
are registered or exempted under both federal and state law.
Alternatively, investors can trade securities through online investment brokers. Study and understand the
terms, conditions and costs of these services, before you use them. Brokers must be licensed, and
must be registered with the Securities Exchange Commission.
Finally, be very careful with information you gather from a chat room. It is in these chat
rooms that persons posing as credible sources send out information to 'pump' the price of a
stock. Once the price of this stock has increased, they 'dump,' or sell their stock at a great
profit. These are called "pump and dump schemes."
"When evaluating an online investment, exercise the same caution that you would bring to any unfamiliar investment opportunity...."
not expect to get rich quick. When evaluating an investment
you have learned about online exercise the same caution and deliberation
that you would bring to any unfamiliar investment opportunity.
The old rule "If it sounds too good to be true, it probably
is," applies just as much to offers made in cyberspace as
to those made through any other medium.
and print a hard copy of any online solicitation you are considering.
This document may come in handy if problems develop later. Be
sure to note the Internet address, date, and time of the offer.
not assume that an online computer service polices its investment
bulletin boards. The vast majority of services take a 'hands-off'
approach to screening claims made in message postings, and even
those that do minimal policing cannot possible keep up with the
millions of messages posted each month. Remember, too, that anyone
can set up a web site or advertise online, usually without any
check on the legitimacy of their claims.
buy little known, thinly traded stocks strictly based on online
hype. Low-volume stocks are the most susceptible to manipulation
since their price can be moved through relatively small strategic
trades. Even if a hyped stock starts to move up, proceed with
caution this may just be part of the overall manipulation
cautious about acting on the advice of individuals who hide their
identity. The use of aliases on computer bulletin boards is
intended to protect privacy, but con artists also can exploit
it. People online may not be whom they claim. What may seem to
be two or more different people talking up a stock may actually
be a single individual with a personal interest in driving up
its price through false information or baseless speculation. In
addition, an impressive-looking website can be the product of
a laptop computer on the other side of the world, far from the
jurisdiction of U.S. law enforcement regulators.
not get taken in by claims of 'inside information' such as
pending news releases, contract announcements, and innovative
new products. In cyberspace, practically anyone can say anything.
Despite the abundance of 'hot tips' littered across bulletin boards
and discussion groups, it is extremely unlikely that genuine insider
information will be publicly broadcasted on an investment bulletin
skeptical about claims that an online stock hypester has personally
checked out an investment. One established tactic of investment
schemers is to talk up companies, mining operations, and factories
in remote corners of the country or the globe, where it can be
impossible for the average investor to investigate or visit in
the time to investigate outside sources of information on
any investment you learn about online. Check with a trusted financial
adviser and always obtain written financial information, such
as a prospectus, annual report, offering circular, and financial
statements. Ask the online promoter where the firm is incorporated,
and call the state's Secretary of State or Commissioner of Securities
to verify that information. Also, make sure that an investment
opportunity and the person promoting it are properly registered
with your state securities agency. In Hawaii, the agency to contact
is the Business Registration Division of the Department of Commerce
& Consumer Affairs.
9. If you think you have been duped, do not be embarrassed about
complaining. Early action increases your chances of getting
your money back and may prevent others from losing money. If you
spot a potential online investment fraud, contact your state securities
administrator, Better Business Bureau (808) 942-2355, or The
Federal Trade Commission (415) 356-5270.
About the Author...
Larry Westfall is the owner http://www.pennystocks101.com