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. Last Updated: 07/27/2016

NASD Targets Stock Fraud In Cyberspace

WASHINGTON -- With the Internet starting to replace telephone boiler rooms as the favored forum of stock-fraud artists, regulators for the National Association of Securities Dealers have decided to fight wire with wire.


NASD Regulation Inc. officials said Thursday they will team up with the Motley Fool, the most popular electronic investment forum, to warn consumers of the financial dangers of taking stock tips delivered in cyberspace. The Motley Fool appears on America Online Inc. and is now available on the Internet.


"Never, never make an investment decision on a company based on an anonymous tip on the Internet," NASD Regulation President Mary Schapiro said at a press briefing with David and Tom Gardner of Alexandria, Virginia, founders of the Motley Fool.


NASDR officials said they are concerned that electronic investment forums are full of tips from those with a vested interest in the stock they are recommending and that more outright financial fraud is occurring in cyberspace.


They announced that Motley Fool has posted warnings on its computer bulletin boards and added a direct e-mail link to NASDR, so investors can send complaints and questions to the new regulatory arm of the NASD, which oversees the Nasdaq Stock Market as well as all registered stock brokers.


CompuServe's Investor's Forum and Prodigy's Money Talk Bulletin Board have added anti-fraud messages to their investment forums and other on-line services will be recruited for the war on stock fraud in cyberspace, Schapiro said.


Schapiro said NASDR officials are now regularly monitoring electronic investment forums for stock tips and cross-checking them against what's happening on the Nasdaq market. When regulators spot unusual activity in a stock, investment bulletin boards are one of the first places they look to see what might be behind it, she added.


NASDR's Web site is at http://www.nasdr.com.