PROTECTING YOURSELF

The Federal Trade Commission’s recent decision to create a nationwide “Do Not Call” list is certain to discourage many aggressive telemarketers – but not all. (See Don’t Call Us). Stockbrokers, particularly the shady variety who use telemarketing schemes to promote obscure companies and pump up the price of worthless stock, are unlikely to be deterred by the threat of an $11,000 fine. To them, it’s just another cost of doing business.

Unfortunately, it’s not always so easy to distinguish the legitimate broker from his or her counterpart. Cold calling can be a legitimate method of reaching potential clients, but it can also be an instrument of securities fraud. Problem is, the accomplished telemarketer is well-trained, knows which buttons to push and has a ready answer for your every question. Still, there are a few simple steps that make it easier to identify the legitimate broker.

1. Start with this basic rule -- if it sounds too good to be true -- it is. If a stranger on the phone promises you a “sure thing” hang up and go back to work, to dinner or to bed, as the case may be. Most dishonest telemarketers, however, will not be quite so transparent. Do not ever make an investment during the initial telephone call or give the caller such personal information as your credit card or checking account number. Honest brokers require written authorization before they can withdraw money from your bank or charge your credit card.
2. If you insist on taking the call, listen carefully. Does the caller ask you about long-term objectives, investment history and risk tolerance? Legitimate brokers will ask these questions before making any recommendation. Take notes, and ask for detailed written materials that support the broker’s claims.
3. Obtain complete, written information about any prospective investment, including annual reports and audited financial statements. Review the company’s history. Has it been making money? Does it have revenues? If you are investing in a public offering, read the prospectus before you agree to buy. If you do not understand the documents, review them with an accountant or attorney that you know and trust. If no documents are available, steer clear of the investment. Most public companies files quarterly financial statements and independently audited annual financial reports with the Securities and Exchange Commission. Those documents are available to the public through the SEC’s Edgar System. (They can be found online by going to www.sec.gov). If a company does not file audited financial reports an investor cannot possibly verify its financial state or the broker’s representations. As a rule of thumb, if you cannot obtain independent information about a company, including audited financial statements, err on the side of caution, and find another investment.
4. Make sure the telemarketer identifies his or her employer. If the name of the firm sounds familiar, be cautious. The Morgan Group is not Morgan Stanley. A.S. Goldmen was not Goldman Sachs. Clever, but duplicitous, brokers choose firm names that sound like better established firms. In reality, they have no relationship with the more established firm. When they recite their “distinguished” track record, don’t be confused. Once you obtain the name of the brokerage firm, check with the NASD and your state securities regulator to see if complaints have been filed against the firm by customers or regulators.
5. Learn to say no, and mean it. Then hang up. Aggressive telemarketers are oblivious to the word no. As long as they keep you on the phone they have a chance to close the deal, so they will use every conceivable technique to keep you on the line. They can be alternately charming, funny, rude, profane or abusive.
6. Does the salesperson’s approach seem too calculated? Does the salesperson’s demeanor change if you hesitate to invest? Does your reticence tend to make them more pushy, or rude? If the answer is yes, end the conversations and the relationship.
7. Even cold callers are required to play by the rules. In the securities industry this means that they can only call potential new customers at home between the hours of 8:00am and 9:00pm. Unfortunately, they are permitted to call you at work at any time of the day. But at least a good receptionist, switchboard operator or secretary will be able to screen those calls. Here’s the key. When a stranger calls the secretary should always take a message rather than putting the call through to you directly. Nine times out of ten the telemarketer will decline to leave a name or number, electing instead to try you again later. He or she may even try to be creative, pretending to be a friend or client, or feigning an emergency. So always ask who’s calling before you pick up the line.
8. When a broker does reach you on the phone, whether at home or at work, they are required to identify themselves and their firm. Be sure you get the exact name of the firm and a telephone number for the caller. If you decide to continue with the conversation pay careful attention. Make sure the broker asks you about your investment background and goals. Once you are satisfied that the salesperson has made a proper, thorough inquiry of your needs, conduct your own interview. Ask the broker’s background, investment philosophy and specialties. Then check out the broker. The NASD will tell you whether a broker is registered to sell securities in your state, and if the broker (or his or her firm) has been named in customer arbitrations or regulatory proceedings. (For this information visit the NASD online site at www.nasd.com). Once you are satisfied that the broker is properly licensed, ask for written information on the brokerage firm. Get references, and call them.
9. Make sure that every investment you are considering has been registered with the Securities and Exchange Commission or your state. If you are buying a stock, find out whether it trades on a recognized stock exchange and how easy it is to get price quotes. Find out if there is an active market for the stock. Before you buy any stock (other than stock in an Initial Public Offering) you should follow its daily progress and watch its price movement. The daily activity of most listed securities can be found in the Wall Street Journal and other major newspapers. Penny stocks are a different story. Few newspapers publish price and volume information for penny stocks. Investors who want to follow these securities can find the information by using several online financial tracking services, including Yahoo! Finance (http://finance.yahoo.com) and the website maintained by the National Quotation Bureau (NQB) (www.pinksheets.com).
10. Make sure you sign up for the national “Do Not Call “ list as soon as it becomes operational. StockPatrol.com will continue to update readers on enrollment information as it becomes available. Remember, if you do not want to be bothered by a stranger on the phone you have the absolute right to be left alone.

Or you can take the easy road when the phone rings with a telemarketing call, and just hang up.




IF YOU HAVE QUESTIONS OR COMMENTS FOR STOCKPATROL.COM, CONTACT US AT editor@stockpatrol.com

NASD WARNS OF ONLINE IDENTITY THEFT

Identity theft has been spreading at alarming proportions - and thieves continue to employ new schemes to obtain personal information about their victims. Their aim is to obtain names, addresses, Social Security numbers (SSN), bank or credit card account numbers without your knowledge, and use that information to commit crimes in your name.

One of the newest and fastest growing tools employed by identity thieves is called "phishing." Here is how it works. The con artist sends an email to consumers that looks like it originated from a legitimate source such as a bank, credit card company or brokerage firm. The message will ask you to confirm personal information about your account with the sender, and may even direct you to a website that looks completely genuine, right down to the logo, typeface and company colors. It may even include links to the real web pages of the broker, bank or credit card firm that supposedly has requested your information.

These phony e-mails suggest an "urgent" need for your personal information, sometimes claiming that your account will become inactive unless you confirm the required details. Recently they have adopted another clever ruse, saying that they need the detailed personal information in order to protect your account against identity theft.

But it is all a scam - and now it has captured the attention of the NASD as well as the Federal Trade Commission. Spam e-mails have begun to proliferate, "phishing" for personal information. According to one industry group, the spasm increased from 176 in January 2004 to 1,197 in May 2004. See www.antiphishing.org.

The NASD is warning investors to be on the lookout for these scams, as well as other devices used by Internet con artists to obtain valuable personal data. According to the NASD, some of these scamsters have been copying brokerage firm web sites - creating phony web sites that misappropriate the name or web site content of legitimate brokerage firms to solicit business from unwary investors.

The NASD also warns investors to be wary of other online identity theft scams, such as Trojan Horses - malicious software programs that hide in files attached to an email or that you download from the Internet. Trojan Horses used in identity theft scams often take the form of "keystroke loggers" - programs that log the keystrokes the investor types, allowing criminals to find the investor's user names and passwords and giving them access to the investor's online accounts.

The NASD offers the following tips to help investors guard against identity theft:

1. Beware of e-mail requesting personal information. Never reply to an unsolicited email that asks for your credit card, bank or brokerage account information, passwords or PINs, social security number, or other types of confidential information, even if it looks like the email comes from a financial institution with which you do business. Instead, contact the bank or brokerage firm directly, using the telephone number that appears on your monthly bill, and inquire about the request.

2. Leave suspicious Web sites. If you think a Web site is not legitimate, leave it immediately and close your browser.

3. Keep your personal and financial information secure online. To protect the security and integrity of information on your computer you should take the following precautions:

•     Download the latest security patches for your system;
•     Install anti-virus and spyware detection software and update those programs frequently;
•     Install a personal firewall software to ward off intruders;
•     Never download software or files from an unknown source;
•     Change your passwords on a regular basis. Never send your password to anyone in an e-mail;
•     Never e-mailing personal or financial information;
•     Review the online security policies of your bank and brokerage firm;
•     Before submitting personal or financial information through a Web site, look for the locked padlock image on your browser's status bar or look for "https://" [note the "s"] at the beginning of the Internet address. While a padlock image and "https://" does not mean that the Web site is authentic or secure, the absence of either the padlock or the https:// does mean that the site is not secure;
•     Log off of any secure legitimate Web site after completing a transaction.

4. Know who you are doing business with. Before you open an account with a brokerage firm, check with the NASD at NASD BrokerCheck to make sure the brokerage firm and broker are properly registered.

5. Order a copy of your credit report. This should be done at least once a year - and more often if you have been a victim of identity theft. You can obtain a copy of your credit report from Equifax (800) 685-1111, Experian (888) 397-3742, and Trans-Union (800)888-4213.

6. Review your account statements. Review all online accounts regularly, checking for unauthorized transactions or withdrawals. Then check your monthly statements for the same information when they arrive in the mail.

7. Act quickly if you believe you've been scammed. If you believe that you have been a victim of Internet identity theft contact the appropriate regulator immediately. If your identity has been stolen contact the Federal Trade Commission's Identity Theft Web site for detailed instructions. If you have been victimized by brokerage firm identity theft, contact- NASD, the Securities and Exchange Commission or your state securities regulator.

The complete text of NASD's advisory can be viewed at http://www.nasd.com/Investor/Alerts/alert_hacker.htm.



IF YOU HAVE QUESTIONS OR COMMENTS FOR STOCKPATROL.COM, CONTACT US AT editor@stockpatrol.com

Hartley Bernstein

Beware of Tsunami Scams

Across the world, millions of well-intentioned individuals are reaching into their pockets to help victims of the December 26, 2004 Tsunami.  Unfortunately, those charitable minded folks may find some unwelcome hands reaching for their wallets.

As we have seen in the past – after other natural disasters and in the aftermath of 9/11 – there always seems to be people who are prepared to exploit the situation for their personal benefit.

With that in mind, we offer the following thoughts to those who are planning to make donations:

1. Be mindful of the credentials of the organizations you support.  Try to deal with well-known entities, but even then, be certain that the money is earmarked for the relief efforts.
2. Make certain that the charity is registered in your state and that it is willing to provide detailed information about its finances and its programs.
3. Be certain of the identity of the charity you select.  Scam artists sometimes pick names that are close to those of existing and recognizable charities to create confusion and divert funds.  This past week, The Washington Times reported that representatives of the Oxfam charity dumped e-mails on people asking them to donate to the charity by sending money to a bank account in Spain.  The problem was they were scammers not connected to Oxfam.
4. Make sure that the charity is experienced at delivering services, not just collecting money.
5. Always make checks payable to the charity, not to an individual, and never send cash.
6. Be wary of "hard sell" telephone solicitations seeking contributions.  Never contribute in response to a telemarketing call without first checking out the credentials of the charity and the solicitor.
7. Do not respond to e-mails soliciting funds or providing "links" to so-called charitable sites.  Always check the urls provided to be certain they really belong to a legitimate charitable organization.
8. Check with your local consumer protection agency or the Better Business Bureau to be certain the charity is bona fide.  The give.org website provides detailed evaluative reports on many of the U.S.-based charities that are providing assistance o Tsunami victims.

Sadly, there is more than one way to profit from a disaster.  One enterprising woman had the ill-conceived idea to purchase an internet address — "tsunamirelief.com" — for $9 and then sell it on Ebay for $99.

She soon regretted her plans and decided instead to contribute the web address.  She received an e-mail from a young Canadian man who said he was putting together a website to help the millions displaced by the disaster.  She gave him the web address, free of charge.  A few days later, she saw the domain name offered on eBay for $50,000.



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