Chat rooms used to skew share prices

Internet chat rooms on financial web sites are dangerous places for investment punters and business journalists, it was claimed this month.

Anyone gleaning tips and leads from these sources maybe unwittingly spreading false information intended to manipulate the markets and cause fluctuations in share prices.

The Association of Private Client Investment Managers and Stockbrokers (APCIMS) has called for regulatory action to prevent investors profiting by spreading rumours designed to inflate share prices. This is known as 'share ramping' or 'punting and dumping'.

'Our concern is the bulletin boards that knowingly and repeatedly carry misinformation,' APCIMS spokesman Brian Mairs told dot.Journalism.

Mairs agreed that there were obvious dangers for business journalists using the chat rooms for leads as any follow-up story could simply compound a libel action.

According to APCIMS, the ultimate sanction would be to ban web sites that carry false information. 'However, it is a very difficult field to regulate and this is not a power the Financial Services Authority (FSA) appears to have at the moment,' Mairs said.

APCIMS first raised the issue on the Radio 4 Today programme this week when the association chief executive Angela Knight called on the FSA to intervene.

'It is not down to us to tell the regulators how to solve this,' Mairs told dot.Journalism. He said he would welcome alternative proposals to banning web sites.

This news follows tough regulatory action taken by the US Securities and Exchange Commission (SEC) to clamp down on similar cases.

This month SEC brought fraud charges against the owner of one investment website. SEC allege that he failed to tell clients that he owned the stock he recommended. The commission has stated that he misled his own members 'by failing to disclose or lying to them about the fact that he already owned - and was contemporaneously selling - the very stock he was recommending they buy'. This practice is known as 'scalping' in the US.

In response to increasing concern about financial investment fraud on the internet, the SEC has published Internet Fraud: How to Avoid Internet Investment Scams.

Free daily newsletter

If you like our news and feature articles, you can sign up to receive our free daily (Mon-Fri) email newsletter (mobile friendly).