Surf Day Monitors Investment Opportunities

Online Investments May Be Touted With Phony Claims

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Looking for an investment opportunity that is "unaffected by the volatile stock market," guarantees "virtually unlimited profits" and "minimizes or eliminates risk factors"? Consumers need surf no further than the World Wide Web for age-old promises in a new and exciting medium, according to a coalition of public and private consumer protection organizations. In a public/private initiative to help investors avoid hyped investments touted on Web sites and Usenet groups, two federal agencies, two national associations and 30 state securities regulators in the United States and Canada surfed over 400 web sites and Usenet group messages looking for bogus claims and illegal representations about investment opportunities. E-mail messages were sent advising that false investment opportunity claims, such as "IRA approved" or "IRA qualified," violate the law. The Federal Trade Commission, Commodity Futures Trading Commission, North American Securities Administrators Association, and National Association of Securities Dealers Regulation, Inc. conducted the "Surf Day" November 12, 1998.

"Claims that an investment is 'IRA approved' are a tip-off to a ripoff," said Jodie Bernstein, Director of the FTC Bureau of Consumer Protection. "No government organization 'approves' IRA investments. Consumers should be just as careful when investing in opportunities touted on the 'Net as they are when they make other investments. They should check out the opportunities with state securities regulators and other investment professionals," she said.

The surf results indicate that investors are being sought for both the traditional and the exotic investment opportunities, ranging from foreign currency, films and restaurants, Internet-related and "offshore" investments and viatical settlements, as well as private and public stock offerings. Often, the online solicitation asks the would-be investor to reply for more information via e-mail or a toll free telephone number.

As part of Surf Day, the CFTC reviewed hundreds of Web sites, and identified dozens for follow-up review. These sites were promoting opportunities to invest in foreign currency and computer trading systems. Such sites can dangle the promise of quick riches at little risk. The CFTC has seen similar Internet promotion of opportunities to invest based on seasonal trends in the prices of commodities like heating oil and gasoline, and other publicly available and widely known information, like the weather effects of El Nino and La Nina. CFTC Director of Enforcement Geoffrey Aronow commented, "Foreign currency has been adopted by many telemarketing scammers and spammers as the product to push on an unwary public. Similarly, seasonal trends and other widely known information do not provide opportunities for profits because the markets react to that information within hours or even minutes of it becoming known. The best protection against these and other similar frauds is careful consumers, who ask questions, act cautiously, and realize that even legitimate trading in these markets is very risky and that something that sounds too good to be true probably is." In the past several months, the CFTC has issued two consumer advisories alerting the public to be wary of such opportunities and providing guidance on how to protect yourself. Those advisories can be found at the CFTC's website at

As part of Investment Opportunity Surf Day, the North American Securities Administrators Association (NASAA) analyzed 1,000 unsolicited e-mail messages forwarded by investors to the group's new E-mail address NASAA received the e-mail messages between October 5 and November 12.

Investors who put their trust in this spam would have ended up with a bear of a portfolio, NASAA found. In an analysis of eight stocks touted in the e-mail conducted the week after Surf Day, none had 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've had to quadruple on average to meet their targeted prices. The eight stocks were also highly volatile, gyrating up and down by more than 20 percent in a single day. "Investors should treat junk e-mail with at least as much--if not more--skepticism as junk mail or a cold call from a stock broker," warned NASAA's Executive Director Philip A. Feigin.

"Investors should remember that the Internet, while the source of a great deal of legitimate investment information, can also be a tool of individuals who may seek to use that information to manipulate stock prices or take advantage of unsuspecting individuals," said Mary L. Schapiro, President of NASD Regulation, Inc. "Investors need to be extremely cautious in reacting to information they read on Bulletin Boards and in chat rooms and take time to consider the source. In most instances there is simply no way to identify individuals who post information and participate in conversations."

According to a June 1998 CommerceNet/Nielsen Internet demographic survey, the number of Internet users over the age of 16 in the United States and Canada has reached 79 million, up from 58 million just nine months earlier. Internet investing is also on the rise, says a report by Forrester Research -- with more than 3 million online trading accounts currently and an estimated 14 million accounts by 2002 with nearly $700 billion in assets.

To help consumers considering investing online, the FTC, NASAA, CFTC, NASD and SEC have launched an effort to educate consumers about precautions to take as they invest. Partners in this education campaign include web sites such as the Alliance for Investor Education [], the Motley Fool [],,,,,, National Association of Investors [], Employee Benefit Research Institute [], Small Business Administration [], and The National Fraud Information Center []. An FTC consumer education advisory, "Online Investment Opportunities: 'Net Profit or 'Net Gloss," says consumers should be careful about claims like:

  • This Investment is IRA Approved;
  • Our Web Site Will Match You with Investment Opportunities;
  • Offshore Investments are Tax-free and Confidential;
  • Submit Your Financial Information Online.

Consumers should use caution before submitting any personal information online in response to an investment sales pitch. Simply requesting additional information by e-mail may result in a consumer receiving unsolicited or unwanted commercial e-mail ("spam").

In addition to the FTC, CFTC, and NASD Regulation, securities regulators in the following jurisdictions participated in the Surf Day: Alabama, Arizona, British Columbia, California, Delaware, the District of Columbia, Hawaii, Indiana, Iowa, Kansas, Maine, Maryland, Massachusetts, Missouri, Nevada, New Hampshire, New Jersey, New York, North Dakota, Ohio, Oklahoma, Ontario, Pennsylvania, South Carolina, Texas, Utah, Virginia, Washington, Wisconsin, and Wyoming.

Copies of "Online Investment Opportunities, 'Net Profit or 'Net Gloss," are available from the FTC's web site at and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

Contact Information

Media Contact:
Claudia Bourne Farrell or Michelle Muth
Office of Public Affairs
Staff Contact:
Alice Saker Hrdy or Stephen Gurwitz
Bureau of Consumer Protection
202-326-2009 or 202-326-3272