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Wednesday, 1 March, 2000, 22:21 GMT
Online share tips warning
online share trading
The FSA warns investors to be wary
The UK's financial watchdog has warned investors not to believe everything they read on internet bulletin boards.

There are hundreds of bulletin boards - online chat rooms for investors - which vary in subject matter from focusing on one individual stock to general sectors.

But with their growth in popularity, and the ease and anonymity of posting messages, there have been growing concerns about their susceptibility to scams.


Last year the American authorities sued a tout who sent out six million unsolicited emails - just to boost the share price of two companies

FSA's Phillip Thorne
Often a fake tip, say someone posing as an insider who knows of a takeover bid looming, may be posted on a wide range of boards.

Even if the originator only writes the message on one board, other readers, if they are duped, are likely to copy it on to other boards.

Their credibility and popularity comes from cases where big mergers or takeover talks have been revealed on bulletin boards days before any announcement has been made.

But the explosive growth of share trading has prompted the Financial Services Authority (FSA) to warn investors to make sure they do their own research before buying a share.

FSA advice
Think about it - why would a stranger want to share a fantastic tip unless they stand to gain
Do your own research - visit the firm's website, read its annual report
Be sceptical - treat postings as if it were gossip you heard in the pub
FSA managing director Phillip Thorpe warned that some people talk up companies in which they hold shares, only to sell out at a quick profit and watch the shares plummet.

The practice, he said, is known as "pumping and dumping".

Another trick to watch for was the reverse operation - known as "trashing and cashing" - where fake messages drive a share price down, at which point the sharp operators can buy shares cheaply.

Mr Thorpe added: "There is potential for the unscrupulous to place false or misleading messages in order to make money for themselves.

Professional touts

"Following such tips blindly can seriously damage your wealth.

"So the simple message is: do some research and do not believe everything your read.

"You should also be aware that professional touts are actually being paid by some companies to recommend their shares.

"Last year the American authorities sued a tout who sent out six million unsolicited emails - just to boost the share price of two companies."

In the UK last month shares in 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) has since said it may now be time for legal action.

In the meantime the FSA's advice is to be aware that one person can create the impression of widespread interest in one stock by posting messages under aliases.

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See also:

22 Jan 00 |  Business
Share dealers warn of web rumours
21 Oct 99 |  Your Money
UK warning on day trading
12 Aug 98 |  Your Money
Internet scams rob investors of $100m
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