Online investors should be aware of stock spam, part of a common Internet fraud involving a "pump and dump" scheme. In other words, a company might be promoted and recommended as the latest hot stock in chat rooms, supposedly unbiased newsletters, or even in its own press releases. Unwitting investors purchase the stock, creating high demand and inflating its price. Then those who are behind the scheme sell their shares at the peak, stop the hype, and the stock price plummets-causing regular investors to lose money.
To protect yourself, always do your research before you invest:
- Consider the source. Be skeptical. People touting a stock may well be individuals who stand to profit.
- Verify information. Making grand claims is easy for a company to do. Before you invest, be sure to independently verify those claims. When you see an offer in an email or on the Internet, assume it’s a scam unless your own research proves it’s legitimate.
- Know where the stock trades. Many of the smallest and most thinly traded stocks trade in the over-the-counter market (OTC Bulletin Board or Pink Sheets). This is because they don’t meet the listing requirements of NASDAQ or NYSE. They’re the most susceptible to manipulation, and therefore the most likely to be the focus of a spam scam.
If you receive a stock spam email you can file a complaint with the Securities and Exchange Commission at http://www.sec.gov/complaint.shtml. You probably only receive an auto-reply from them, but they do take complaints seriously and may be acting on yours behind the scenes.