BankingInsuranceSecurities.Com, the leading website for news and information in the financial services sector has today added a new section to help securities houses, bankers, regulators and others identify new pump and dump schemes and to put a stop to them as they happen.
The service (which appears in the Securities section of www.bankinginsurancesecurities.com ) will also help businesses as an early warning system that their shares are under attack by fraudsters and market manipulators.
Pump and dump schemes are most prevalent in penny shares, especially on the USA's various over-the-counter (OTC) markets.
Fraudsters purchase shares - or take options on shares - in the days leading up to their proposed manipulation. They often buy in small lots so as not to move the share price.
Then the fraudster bombards millions of e-mail accounts and internet bulletin boards with false or inflated claims as to the potential of those shares, intending that other persons will buy shares. As demand increases, so does the price of the shares leading to a paper profit.
Once the fraudster sees that his shares have risen by what he considers a suitable margin, he sells (or "dumps") the shares he bought. He makes a profit.
But those who bought based on the "pumping" of the shares see the price fall, rapidly, as the fraudster's sale depresses the market.
"Many victims are simply gullible, some are greedy and some are - to be polite - stupid," says the Anti Money Laundering Network's Nigel Morris-Cotterill. "The stupid ones are those who invest a pile of money into the share knowing it is being pumped but believing that they will be able to sell out before the fraudster and make a gain whilst simultaneously undertaking some kind of guerilla action in which the price falls leaving the fraudster sitting on a loss. Not only is it highly unlikely that their timing will result in a gain, it is even more likely that the fraudster will still exit at a price higher than he paid. Those who suffer in such cases are the gullible and greedy who see their investments wiped out."
The new service, which invites recipients of pump and dump schemes to post them for review and examination prior to publication at BankingInsuranceSecurities.Com will provide an invaluable tool in the fight against this kind of market abuse.
"There is a pattern: the bulletin board notices begin to appear in the evenings in the USA - at a time which is mid-evening on the west coast and late evening on the east coast. "That's when broker-dealers, bankers, regulators and company managers have gone home," says Morris-Cotterill. The plan, he says, is that orders are placed overnight so that the price shoots up as soon as the market opens the following morning. Sometimes the dumping will happen within a hour of the market opening.
"The situation is made worse by the so-called blogosphere," says Morris-Cotterill. Many people run websites which are nothing more than republication sites and they exercise no discretion over what they publish. Also free, unedited, "press release" sites allow apparently authoritative documents to appear without checking for legitimacy. So the information spreads rapidly, beyond the original targets set by the fraudsters."
Securities dealers, regulators and owners of businesses will be able to get alerts in several ways: using the RSS feed from www.bankinginsurancesecurities.com, by setting up a Google News Alert and by following amlnet on twitter.
Notes:
1. BankingInsuranceSecurities.Com is published in the UK by Vortex Centrum Limited a UK Corporation. See www.vortexcentrum.com for more information.
2. Vortex Centrum Limited is the information services and publishing company of The Anti Money Laundering Network, the ultimate holding company of which, The Anti Money Laundering Network Limited, is a privately held, Hong Kong registered holding company.
3. BankingInsuranceSecurities.Com
Contact: The Anti Money Laundering Network Global Response Centre is located in Kuala Lumpur Malaysia. Tel: +6 03 2078 9152
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