Regulators warn investors to be wary of online investment tips

Vancouver -- Canadian securities regulators are warning investors of the perils and risks associated with acting on investment tips from the Internet during the RRSP season.

In recent years, financial news websites, chat rooms and bulletin boards have sprung up to feed the investing public's desire for instantaneous news and easy access to financial information. But, with the new medium come new risks.

"In a relatively short time, investors have flocked to the Internet to seek out financial information," said Doug Hyndman, Chair of the Canadian Securities Administrators (CSA), the umbrella organization representing the 13 provincial and territorial securities commissions. "With the Net's popularity, scam artists and con men have also staked out their turf and shifted their operations online."

The typical online investment fraud involves con men "touting" or promoting companies in chat rooms and over bulletin boards. They often claim to have "inside information" that makes a company's stock a "must buy." These are usually unsupported claims. The fraudsters usually own stock in these companies which they dump as soon as the share price rises as a result of their online promotion. Investors who buy in on these online tips are the ones who suffer after the share prices plummet when the touting stops.

To avoid cyber-fraud, investors should be alert to signs of fraud:

• Don't believe everything you read. Remember how easy it is to disguise your identity online. The scams usually involve projects in remote corners of the globe that can't be easily checked out, or use endless technical jargon.
• Avoid claims of "inside information." Hot tips posted online are seldom, if ever, true. Remember, trading on inside information is illegal in Canada.
• Don't buy thinly traded, little known stocks based on information from a chat room. These types of securities are easily manipulated. Unlike blue chip stocks, the price of thinly traded, low priced shares can be moved significantly through relatively small trades.
• Don't assume that your online service provider polices its investment bulletin boards. Most don't.
• Always take the time to do your own research based on reputable information sources. Seek advice from a qualified, independent financial adviser.

For more information about online investing, contact your local securities regulator for a copy of the CSA's 'Investing and the Internet' brochure or visit the CSA website at www.csa-acvm.ca.

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