Stock spamming is the process of touting cheap equities via bulk e-mail messages promising quick profits for investors. More often than not, the quick profits come to the stock promoter at the expense of the newly solicited investors. The Securities and Exchange Commission [SEC], in an attempt to curtail these shady promotions, is finally addressing this practice.
Just recently the SEC suspended trading in 35 stocks that had been touted in aggressive spam campaigns. The trading suspensions are to last for at least 10 days with further investigations, which could lead to arrests. Interestingly enough, this new mission initiated by the SEC is referred to as Operation Spamalot.
Spam has been a problem for the Internet community for a long time now. According to a leading Internet security company, Secure Computing, spam has now increased to the point where it comprises more than 90 percent of all e-mail messages. In addition, stock spamming is a huge piece of that accounting for more than 30 percent of all spam.
The goal of these stock pushing e-mail messages is to influence any investor with an e-mail account to purchase shares in a particular stock, typically one that has very few shares available to the public. The promoters of these issues purchase shares prior to sending out their e-mail messages, and then sell when the price rises. Of course, the new investors who invest in these stocks quickly see the value of their shares plummet.
According to the SE more than 100 million of these e-mail type messages are now being sent per week. In addition, they also stated that these stock spam practices have caused hundreds of millions of dollars in investor losses. SEC officials assert that this stealing from investors is not only destructive but illegal as well. Officials go on to say the recent crackdown is just the start of what is going to occur and it should send a crystal clear message to spammers that this activity will not be tolerated and that they will be held accountable.
As investigations continue it appears that some of the companies accused in the stock spam may be complicit in the scheme. The SEC also questions the adequacy and accuracy of information that these companies make public. For instance, one company under investigation, Red Truck Entertainment, a music and film company located in Scottsdale, Arizona, was previously named Montana Oil and Gas with offices in Vancouver, British Columbia. Prior to this the company was called Sierra Galleries, which had another totally different offering. All of this of course raises eyebrows at the Securities and Exchange Commission.
According to Secure Computing the SEC has certainly went after the right targets. They claim that to effectively get a handle on these stock spam activities the SEC will need to continue to come after these promoters and where needed follow-up with strong prosecution. It seems very apparent that many of these stock spamming operations have their days numbered.
Senior Writer, Options Strategist & Profit Strategies Radio Show Market Correspondent
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Securities and Exchange Commission, SEC, Operation Spamalot, Spam, Bulk E-mails, Secure Computing