 Sorting good info
from the bad
By GREG COOK
Essex County Newspapers
One of the biggest dangers of online investing is following bad advice
posted on the Web.
"You've got to be skeptical about what you read and there are people
that are going to use the sophistication of the Internet ... and try to
take advantage of you," said John Reed Stark, chief of the Office
of Internet Enforcement for the federal Securities and Exchange Commission
(SEC).
The SEC has filed more than 200 enforcement actions to try to stop alleged
perpetrators of Internet fraud since 1995, he said. The federal agency
has mainly addressed people who have used the Internet to spread false
information and artificially inflate the price of stocks they own.
"There's nothing on the Internet that really separates the good
information from the bad information. An investor should really always
do their homework," Stark said.
The SEC offers the following advice in the Internet enforcement section
of its own Web page (www.sec.gov):
Download and print a hard copy of any online solicitation you are considering.
Make sure you catch the Internet address and note the date and time you
saw the offer.
Be wary of promises of quick profits, offers to share "inside"
information and pressure to invest before you have an opportunity to investigate.
Be careful of promoters who use aliases. Pseudonyms are common online
and some sales people will try to hide their true identity. Look for other
promotions by the same person.
Check whether the your state securities regulator or the SEC has received
any complaints about the company, its managers or the promoter.
Before you invest seek information about the company off-line and always
obtain written financial information _ such as financial statements and
annual reports _ from the company.
Words like "guarantee," "high return," "limited
offer" or "as safe as a CD" may be a red flag. No financial
investment is risk free and a high rate of return means greater risk.
Watch out for offshore scams and investment opportunities in other
countries. When you send your money abroad and something goes wrong, it's
more difficult to find out what happened and to locate your money.
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