How not to end the penny stock spam scam (part 2 of 2)
News today that the SEC has decided to try and regulate away a problem that the market could easily fix for itself. Suspending trading in 35 companies that have been the subjected of repeated ramping spam may look like a fix, but it has obvious drawbacks, not least its reliance on regulators being able to move faster than the spammers. As I've said before, the solution to this problem can easily be implemented at the broker end. You can't buy shares without going through a broker, so all that's needed is a warning at the broker's site if you try to trade a share that's currently the subject of a scam. How hard can it be for brokers to find out which stocks are being spam-ramped, given that the explicit point of the spam is to send it to as many people as possible? Perhaps Google, who seems rightly concerned about the problem, could simply send them a list collected from Gmail.
I think that this wouldn't get rid of the stock spam, but it'd certainly make it 90% less effective by forcing people to jump through some hoops by talking with a professional first. Whether or not a penny stock is being spammed, most brokers wouldn't let their clients buy it without a fight, unless the client was particularly insistent about getting ripped off.
Posted by: Davis Freeberg | March 09, 2007 at 07:28 PM
David - fair point, some people would probably insist on buying the ramped shares anyway. Perhaps we could get that down below the point at which the spam is viable though?
Thanks for commenting.
Posted by: Seamus | March 11, 2007 at 08:50 AM