Share dealers warn of web rumours

False information on the internet is distorting share prices, warns the trade body representing UK stockbrokers.

In recent weeks, several companies have had to issue statements to the London Stock Exchange after misleading comments were circulated on financial websites.

Private investors are having more and more effect

Last week, shares in British coffee roasting company Coburg Group suddenly rocketed after an anonymous tipster suggested it was about to transform into an internet concern.

This appeared to be news to Coburg's board, which put out a statement saying it was unaware of any reason for the share price rise.

The Association of Private Client Investment Managers and Stockbrokers (APCIMS) says it may now be time for legal action.

Chat-sites

Online trading has proliferated in the UK over recent months, with the London Stock Exchange now processing almost 100,000 private client trades every day - two-and-a-half times as many as this time last year.

Although most private traders deal in relatively small amounts - the average is about £5,000 - the sheer number of people doing so means they are wielding more and more power in the markets.

The APCIMS warning refers to internet chat rooms, where novice dealers can share gossip, tips and information.

On these sites there have been several instances of "share ramping" or "punting and dumping".

Investors deliberately offer misinformation - there is often no way it can be verified - to raise the share price, and then sell the shares in question at falsely inflated prices.

Angela Knight, chief executive of APCIMS and a former treasury minister, said sites "knowingly and repeatedly" party to misleading information should be banned.

Firms which run the websites say they offer a valuable service and help novice investors to let off steam.

But there is growing pressure for the main city regulator, the Financial Services Authority, to prosecute the unqualified internet tipsters.