Investing and the Internet - Be Alert to Signs of Fraud

There is an abundance of information on personal investing and finance markets available on the internet, making it an invaluable investor tool. Mutual fund firms, government agencies, exchanges, media services, financial advisers, and securities have created hundreds of websites providing up-to-the-minute information about products and investing. With a few simple keystrokes, investors with a PC and modem are able to gain access to a wealth of investment resources and up-to-date market data unlike ever before.

The Internet is a powerful thing, but investors should be aware when venturing out into the online world, as investment scam artists and quick-buck operatives are exploiting the Internet, those who are out to do nothing more than take your hard-earned money from you.

We at Transpacific Mergers & Acquisitions Commission have launched new systems to assist in stopping cyber fraud. However, sadly there are still many areas on the World Wide Web where crooks can open up shop. It does not mean though that you should avoid cyberspace, but implies that investors should be aware of the warning signs and inappropriate practices, like:

Unregistered Investment Adviser

The law states that those businesses trading/advising in stocks and securities must be licensed or registered with their state or territory Securities and Exchange Commission (SEC) where they carry on business. More and more foreign dealers market their services on the world wide web and the Internet, performing business and taking on clients in territories where they are unregistered.

Internet Touts and Advertising Promotions

Online publicity boards, media and discussion groups devoted to topics on investment, may be valuable forums for those wishing to invest, sharing ideas on personal investment. Sadly, scammers use these types of forums to hawk specific stocks and securities for their own financial gain often using aliases. These imposters post specific messages intended to stimulate curiosity in a stock/security, typically one which is bought and sold in the market ‘over-the-counter’ or on venture capital.

Such messages can occasionally be in the form of fake discussions or testimonials. The typically contain unsubstantiated share price forecasts or ‘hot tips’ on prominent news which has not been divulged to the public. What these messages do not show is that the individual is touting the stock merely for their gain.

Misrepresentation of Facts

Facts and figures that you see on your computer screen may not necessarily be true. The number of complaints being received by regulators about investment information misrepresentation via email or through the internet is increasing.

Frequently the deceptive information is posted with via an alias or anonymously, rendering it hard to verify its source.

In further instances, the misinformation is made by financial advisors or organizations who when preparing their digital communications, do not take as much care with them as if they were preparing authentic documents for the regulators.

Trading Manipulation

By means of anonymous cyber-touts and falsification, the internet has been used by online schemers to aid them in falsely running up the value of thin-trading stocks and securities.

• Unsuspecting investors study the hot tips which offer large profit potential with limited risk but are not aware that the greater part of these shares is being held by small groups of people who are hiding behind the promotion and hype.
• While the investors are rushing toward the market, so they can ‘get in on the action,’ the group of con artists is cashing in, selling their cut-rate shares in the intensifying market.
• Once the hysteria-fueled shares stumble in price, the cyber-schemers may well accuse unidentified short sellers, or even cause victims more harm by encouraging them to buy extra shares (average down) as the value falls.
• Shortly after, the stock or security regularly vanishes from sight, leaving the investigators to publish plaintive “What became of Organization X” messages.

Unscrupulous con artists, over previous decades, have been seen so many times, and the Internet, unfortunately, makes it easy for them to reach a broader, unsuspecting audience of investors.

Unlawful Distributions

With such a powerful Internet, it has attracted a variety of new schemes trying to sell securities illegally to the public. The standard rule is that a company is vetted by the regulators before it is allowed to distribute securities to the public. Notwithstanding, all securities should be distributed via a recognized dealer, one who is registered.

New ventures are frequently being exposed where organizations are marketing and selling stocks and securities online to the public, devoid of the legal prerequisite for providing detailed information to investors about their organization and the securities they are selling or having lodged the necessary prospectus.

Defending Yourself Against Cyber-Fraud

A number of the offensive online invest schemes are difficult to distinguish between the ones that, for decades, have been utilized elsewhere. The world wide web, nonetheless, epitomizes the enormous advancement con artists have made when victimizing unsuspecting investors. Some simple precautionary measures may avoid you becoming one of the victims.

Never believe all that you read.

• Assess online information just as you would if a stranger gave you a hot tip.
• Practice healthy suspicion and don’t forget how simply people can disguise their identity online.
• Bear in mind that investment cyber-schemers frequently ‘talk up’ ventures in distant corners of the world which are not readily proven or use unending professional jargon which only experts understand.

Don't presume you recognize the person you are talking to.

• Notice boards and chat group contributors may well not be who you think they are.
• Individuals recommending particular securities might have no investment qualifications at all, but do have hidden motives

Don't presume that your cyber service provider regulates its investment notice boards.

• The majority don’t
• The amount of posts sometimes submerges those who try
• Frequently, nothing will stop con artists from publishing 1 or 100 propositions for a single scam

Don't buy finely traded, rare securities based solely on information gained on the Internet.

• These securities have the highest vulnerability to being manipulated
• In contrast to blue-chip stock, low-priced, thinly-traded securities can be knowingly moved through particularly small strategic trades; this is the reason why Internet hype typically relates to unknown or young organizations
• At all times, undertake your own research founded from reliable information sources

Don't get conned by statements made around 'insider trading.'

• Bulletin boards and forums focused on investments are filled with information about ‘hot tips’ which are certain to make particular stock soar in price
• Ask yourself this, “If these stocks are so impressive, why would they be telling me?”
• Such ‘hot tips’ are rarely (if ever) true
• Albeit they are genuine, insider trading is illegal

Keep a lookout for any conflicts of interest.

• Some individuals who evaluate and advocate online securities are receiving compensation from the organization whose stocks they are supporting. A few disclose this information. However, many others will not mention any conflict of interest.
• Be confident you understand the reason behind someone being too enthusiastic about a particular investment prospect

Be assured that the stock qualifies for sale and that it is being sold by someone who is legitimately registered with your securities regulator.

• Securities laws are created to safeguard investors against fraud and misapplication which apply on the Internet.
• Failure for organizations, broker-dealers or financial advisors to conform with the regulations is frequently a ‘red flag’ for investors that it is a possible investment scam
• Your territory securities regulator will be able to tell you if an organization or individual is registered for trading and advising and if the organization selling the stock or security
• Your securities regulator can tell you whether a person or organization is registered to trade or advise in your area and whether or not the organization marketing the stocks have submitted a prospectus.