Regulators warn against on-line hoaxes

By ROMA LUCIW
Globe and Mail Update

Securities regulators are urging Canadians to stay clear of investment advice found on the Internet during RRSP time, warning that the unchartered medium is littered with scam artists and con men.

"In a relatively short time, investors have flocked to the Internet to seek out financial information," Doug Hyndman, chair of the Canadian Securities Administrators said in a release.

"With the Net's popularity, scam artists and con men have also staked out their turf and shifted their operations on-line."

According to the CSA — an umbrella organization for securities commissions — a typical on-line investment fraud uses con men to promote companies in chat rooms and bulletin boards. The men make what are usually unsupported claims to have inside information that makes a company's stock a must-buy.

In reality, the con men can own stock in these companies, which they dump as soon as the share price rises because of their on-line promotion.

"Investors who buy in on these on-line tips are the ones who suffer after the share prices plummet when the touting stops," the CSA said.

Last March, the Ontario Securities Commission set up a bogus Web site that managed to attract thousands of hits from potential investors, and generated offers to invest a total of $50,000.

The OSC said it created the Internet scam to demonstrate the risks of making investment decisions on unverifiable information found on the Internet.

If it looks too good to be true, it probably is, the OSC said.

At the time, the OSC said it receives few complaints from investors about Internet scams.

Some CSA tips for avoiding cyber-fraud:

• Be skeptical of financial advice on-line. Remember how easy it is to disguise your identity on-line.

• Beware of sites that use endless technical jargon.

• Hot tips posted on-line are seldom, if ever, true.

• Don't buy thinly traded, little known stocks based on information from a chat room. These types of securities are easily manipulated.

• Do not assume that your on-line service provider polices its investment bulletin boards. Most don't.

• Do your own research.