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The BBC's Jeff Phillips reports from Washington
"The Securities and Exchange Commission receives hundreds of complaints every day"
 real 28k

Thursday, 30 March, 2000, 04:26 GMT 05:26 UK
US regulators fight internet fraud
Wall Street
Wall Street is online, with opportunities for fraud
US financial regulators are creating an automated surveillance system to search internet sites and message boards in an effort to stamp out fraud.

The Securities and Exchange Commission (SEC) receives hundreds of complaints every day from people claiming that they have been tricked by misleading information about shares published on the internet.

It already employs more than 200 lawyers, accountants and investigators to detect internet fraud but hopes that by automating the process, the cyber force will be free to concentrate on more detailed investigations.

But civil liberties groups and some financial houses are alarmed at the development, which they say is like tapping private telephones.

Online forums

The new system will copy online material into a database to be analysed by SEC investigators.

The SEC says it will not gather e-mail messages or other communications unless they appear in public online forums and will throw away any data collected that does not indicate possible wrongdoing.

Internet chatrooms will not be covered by the new surveillance system.

"Privacy issues are of long-standing importance to the commission and we pay close attention to the letter and the spirit of the law," said SEC spokesman Chris Ullman.

But Larry Ponemon, a partner in charge of privacy issues at PricewaterhouseCoopers, one of the world's largest accounting and consulting firms, said the SEC's proposal was akin to wiretapping.

He said it brought up possible violations of the US Constitution's protections against unreasonable search and seizure.

Fraud

There have been a number of cases of suspected financial fraud involving the internet.

In one case a student was charged with setting up a website to promote shares that he had bought cheaply.

When the price rose, he sold them, making an illegal profit of several hundred thousand dollars.

The net is also being used to distribute confidential commercial information.

A clerk in an investment company was this month charged with providing information about proposed mergers to a group of private investors by means of a chatroom on the internet.

It was the first case in the United States of what the prosecution called "insider trading millennium-style".

Nearly 10 million people in the United States have online share trading accounts and millions more use information from the internet to make investment decisions.

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See also:

24 Mar 00 | Business
US leads internet fraud sweep
30 Nov 99 | Business
Online share dealing - is it safe?
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