EDITORIAL PAGE — Scams in cyberspace

Those of us who are still pedestrians on the “information highway” — novices struggling to get a handle on the most basic and popular service: electronic (or “E”) mail — might be surprised to learn that securities regulators are expressing concern over the proliferation of investment schemes accessible on the system.

The North American Securities Administrators Association (NASSA), an international regulatory association, warns that illicit investment schemes are flourishing on computer bulletin boards as well as on the informal web of computer networks available on the Internet.

NASSA says the investment fraud problem could worsen over the next few years as several million unsophisticated newcomers pile on to the once lightly travelled highway.

Already, it is estimated that more than 10 million computers worldwide are linked to the system. Hundreds of thousands of people routinely “surf the Net,” from novices or “newbies” to the advanced “mouse potatoes.” No matter what your interest (rare butterflies, Albanian politics, Civil War weapons, rose gardening, etc.), soul mates are easily found on the Net.

The number of users is expected to grow as people come to realize that it is possible to gain access to a storehouse of information on just about any topic, including investments. Good research data and financial news are now instantly available to anyone with a computer and a modem, and this certainly has the potential to help investors become better informed.

The problem for securities regulators is that some of the financial “information” being swapped freely might better be described as “misinformation, rumor and gossip.”

It is virtually impossible to assess the scope of the problem, as the Net is largely unregulated. Some see this as a virtue, regarding the Net as the last bastion of free speech, while others are calling for more control.

For the time being, however, no mechanism is in place to monitor the different types of messages, advertisements, solicitations and promotional materials that are accessible to anyone who is hooked up to receive or transmit them.

But already, problems have been documented, particularly in the area of high-tech pyramid scams, E-mail chain letters, stock manipulations, and the offering of financial “advice” from persons of questionable character.

NASSA says the potential for stock manipulation is huge because a string of messages promoting a little-known company — messages which are ostensibly sent by many different individuals — can easily be sent by one single source. Among the most popular targets for “cyber-manipulation,” NASSA says, are Canadian gold, silver and diamond mining stocks.

Securities regulators across North America are taking steps to warn the investing public about the problem. The rules are simple: don’t take what you read at face value; don’t assume that your on-line computer service polices its investment bulletin boards (most do not); don’t buy thinly traded, little-known stocks on the basis of on-line hyperbole; don’t act on the advice of a person who hides his identity; don’t get suckered by claims about “inside information,” including pending news releases and contract announcements; and be vigilant regarding conflicts of interest.

And finally, NASSA warns, “don’t expect to get rich quick in cyberspace.”