Cook warns surfing can be hazardous to your wealth

Secretary of State Bekki Cook is warning Missourians that basing investments on Internet tips "can be hazardous to your financial health."

"More and more people are turning to the Internet as a source of information, and many are using it as a tool for making investment decisions," said Cook in a recent press release. "But using the Internet and your e-mail as the sole sources of information on investments is often unwise.

"As with any investment opportunity particularly one you learn about over the Internet be sure to check it out and get the facts. Something that is a good investment opportunity today will still be a good opportunity tomorrow, if it is legitimate,"

Cook and Missouri Securities Commissioner Douglas F. Wilburn cited a recent study done as part of Investment Opportunity Surf Day (Nov. 12), a joint regulatory effort by state securities regulators, the Federal Trade Commission, the National Association of Securities Dealers and the Commodity Futures Trading Commission.

The Missouri Securities Division participated in the Surf Day Study.

The group analyzed 1,000 unsolicited e-mail messages forwarded by investors to the state regulators via its umbrella organization, the North American Securities Administrators Association. Roughly 40 percent of the e-mails were securities-related; a similar percentage involved speculative "business" opportunities.

"For stock fraudsters, the Internet has become an alternative means for distributing sales pitches," Wilburn said.

"Reaching people via e-mail is more efficient and much cheaper than contacting them the old-fashioned way, through telephone boiler rooms where high-pressure salespeople sit shoulder-to-shoulder reading from elaborate scripts," he added.

The vast majority of the securities-related e-mails received from Oct. 5 to Nov. 12 promoted eight over-the-counter stocks. In one case, investors were urged to buy shares in a company that supposedly had developed a solution to "Y2K problems 100 percent of the time."

The e-mails received invariably contained bullish, if not far-fetched, predictions such as a restaurant chain whose revenues were projected to grow 300 percent for the '97-'98 fiscal year. In another case, a Web site promoting low-priced over-the-counter stocks claimed that "with 1.2 million visitors per day ... there's no chance the stocks can't rise!!!"

Investors who put their trust in these unsolicited e-mails, commonly referred to as "spam," would have ended up with a bear of a portfolio, regulators found.

An analysis of the eight recommended stocks revealed that none reached the price projections claimed in the "spam." In fact, six of the eight securities were trading below their recommended purchase prices. Projections were so bullish that stock prices would have had to quadruple, on average, to meet their targeted prices.

Cook and Wilburn said investors logging on to the Internet for stock tips should be very wary about what they find.

"Investors should treat junk e-mail with at least as much if not even more skepticism as junk mail or a cold call with an investment offer," Cook said.

Missourians should forward suspicious securities-related e-mail they receive to the Missouri Securities Division at

ssecurit@mail.sos.state.mo.us,

so securities investigators can review it.

Cook and Wilburn stressed that investors who are tempted to act on Internet stock tips should check to make sure the investment is registered in Missouri. The Investor Hotline maintained by the Secretary of State's Office is 800-721-7996.

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