Senate bill cracks down on online stock fraud

A bill is to be introduced in the US Senate that could help authorities fight online stock fraud.

Senator Susan Collins hopes her proposed law will give the Securities and Exchange Commission (SEC) a faster way to tackle fraudsters who engage in "pump and dump" practices.

The trick of spreading a rumour about a company's value and then selling stock as the price rises has been used before on Wall Street, but on the Internet those rumours are reaching a much wider audience of unsuspecting investors.

As the chairman of the Senate's permanent subcommittee on investigations, Collins has already held hearings into stock fraud. In a statement on her Web site at http://www.senate.gov/~collins/ , she explained: "We have found that con-artists have embraced the new technologies of the Internet in order to prey on Web-surfing investors. Securities frauds have moved from the boiler rooms of yesterday to the Internet chat rooms of today."

Earlier this week, the value of Pairgain Technology - a Californian telecoms equipment manufacturer - soared after a fraudulent claim was posted on a fake Bloomberg News page. A Yahoo message board picked up the tip - that the company was being acquired by Israeli firm, ECI Telecom - and Pairgain's value saw a 30 per cent rise.

Collins wants individual states to cooperate with SEC investigations. The SEC is currently not able to use evidence gathered by states, and must start their own investigations from scratch.