http://www.bergen.com/biz/fraud2489903247.htm
Finding cyber criminals is a big job
Wednesday, March 24, 1999
By MARCY GORDON (AP)
WASHINGTON -- To fight Internet investment scams, state regulators are
going undercover on line and federal authorities have a "Cyberforce" that
does electronic surveillance.
Both sides, however, face a daunting task in combating growing instances
of Internet fraud with limited resources, top officials said Tuesday at a
hearing of the Senate Governmental Affairs subcommittee on investigations.
"We're going to continue to be vigilant," promised Richard Walker, the
Securities and Exchange Commission enforcement director. He acknowledged,
though, that with 850 attorneys and other enforcement employees nationwide
to pursue all types of financial fraud, "We are certainly challenged, if
not strained."
The mushrooming use of the Internet by financial con artists has forced
the SEC to take resources away from other fraud areas, Walker said,
including conventional stock manipulations and insider trading.
In addition, the SEC director said the commission is examining the
advertisements of electronic day-trading firms to see if they make
unrealistic promises to investors.
The firms sell training courses and special software programs to ordinary
investors who want to try the risky, lightning-speed practice of day
trading, exploiting small price movements in stocks to make a profit.
The agency last July set up a Cyberforce of 125 people who pore through
the Internet on the lookout for fraud.
Because the Internet is everywhere, unscrupulous stock promoters anywhere
in the world can cloak themselves in anonymity and entice thousands of
investors "with the click of a mouse," noted Sen. Susan Collins, R-Maine,
chairwoman of the investigative panel.
Collins said she would consider drafting legislation designed to help
securities regulators in fighting on-line fraud.
Stocks now can be promoted fraudulently in Internet junk mail, on-line
newsletters, electronic "chat rooms" and Web sites. Promoters don't have
to give potential investors the hard sell over the telephone in
unsolicited calls.
The rapid growth in on-line securities fraud "could ultimately place a
significant burden on the regulators' limited investigative staff
resources and thereby limit the agencies' capacity to respond
effectively," congressional investigators concluded in a new report
released by the subcommittee.
Compounding the problem, the SEC has lost many of its enforcement
attorneys in recent years to the more lucrative private sector.
State securities regulators also are feeling the pinch.
"There will never be enough regulators to keep the on-line world free from
fraud and abuse," testified Peter Hildreth, president of the North
American Securities Administrators Association, which represents the state
authorities.
State regulators, unlike their federal counterparts, have the authority to
go undercover to detect fraud on the Internet. They can establish e-mail
addresses to go "shopping" for fraudulent stock solicitations in pursuing
enforcement cases.
SEC attorneys and aides are required by federal privacy laws to identify
themselves on the Internet.
That's a "limitation," Walker said. He added, however, that a great deal
of fraudulent activity had been discovered through electronic surveillance
as opposed to participation.
-o-
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Received on Sat Apr 3 10:55:41 1999